APPROPRIATION (NATION BUILDING AND JOBS) BILL (No.2) 2008-2009
THE INQUIRY
1.1
The Appropriation (Nation Building and Jobs) Bill (No.2) 2008-2009 (the Bill)
was introduced on 4 February 2009 as part of a package of six bills
to give effect to the Government’s Nation Building and Jobs Plan.
1.2
On 5 February 2009, the Senate referred the provisions of the Bill
relating to the social housing program to the Community Affairs Committee (the
Committee) and the package of bills to the Finance and Public Administration Committee
(F&PA). The presentation of the Committee's report was made an order of the
day for 12.31pm on Tuesday 10 February 2009. In taking evidence in
relation to the Bill the Committee could not meet to consider the Bill at the
same time as the F&PA Committee was meeting to consider the Bill and
related bills. On 9 February the presentation time for the report was
moved to 7.31pm on 10 February.
1.3
The Committee's inquiry concerned only the social housing program. The
broader economic and fiscal issues underpinning the Nation Building and Jobs
Plan were considered during the Finance and Public Administration Committee's inquiry
1.4
The Committee received 2 submissions relating to the Bill and these are
listed at Appendix 1. The Committee considered the Bill at a public hearing in Canberra
on 10 February 2009. Details of the public hearing are referred to in
Appendix 2. The submissions and Hansard transcript of evidence may be
accessed through the Committee’s website at https://www.aph.gov.au/senate_ca .
THE BILL
1.5
The main purpose of the Bill is to propose appropriations from the
Consolidated Revenue Fund for services that are not the ordinary annual
services of the Government in relation to the Nation Building and Job Plan.[1]
During the Second Reading speech of the Bill in the House of Representatives,
the Treasurer, the Hon Wayne Swan MP, noted that the Commonwealth Social
Housing Initiative will provide up to $6 billion to the states and territories
to fund the construction of approximately 20,000 new dwellings. The
Commonwealth will also provide $400 million for repairs and maintenance of
existing public housing stock over two years.[2]
1.6
The initiative is intended to boost the supply of public and community
housing for people who are homeless, at risk of homelessness, or who are paying
very high rental costs. Details released as part of the Updated Economic and
Fiscal Outlook (UEFO) indicated the funding will be provided over three and
a half years from 2008-2009 to 2011-2012. The UEFO stated:
The first stage of this program is to fund some 2,300 new
dwellings by bringing forward construction already approved. The remainder of
the funding will be allocated to address areas of most urgent need. State
governments will be responsible for conducting Commonwealth approved tender
processes for the construction of the additional dwellings. Tenders will be
structured to include spot purchases of new house and land packages to ensure
both large and small builders benefit from increased construction activity.[3]
1.7
The funding for social housing will begin immediately and new houses
should be largely completed by 2010. $200 million will be provided this
financial year for repairs and maintenance and $60 million for new
construction. The funding will be allocated to state and territory governments
on a per capita basis through a new Economic Stimulus National Partnership
Agreement signed on 5 February 2009 at a special COAG meeting held to
ensure rapid delivery of economic stimulus measures to support employment and
growth and to foster a more resilient Australia. See Table 1 for funding
by jurisdiction. The actual number of new dwellings will depend on a range of
factors, such as their size, type and location and the capacity of States and
Territories and the not-for-profit sector to leverage additional funds from
other sources.[4]
1.8
The allocation of funding will be over two stages:
- Stage One - States will initially be allocated funding (up to
$692 million) for suitable projects already in their development pipelines that
can be brought forward and built in the time frame (2008-09 and 2009-10).
States have agreed to submit proposals by 15 March 2009 and the Commonwealth will make allocations for stage one construction projects by 1 April 2009; and
- Stage Two - Funds from 2009-10 to 2011-12 (around $5,296 million)
will be allocated to States on the basis of an assessment of suitable
proposals. States have agreed to submit proposals by 30 June 2009 and the Commonwealth will make allocations for stage two construction projects by 30 August 2009.[5]
Table 1:
Funding by jurisdiction
Source: Additional
information tabled at hearing 10 February
2009 (Department of Families, Housing,
Community Services and Indigenous Affairs).
1.9
In addition to the funding commitments by the Commonwealth, it was
agreed at the COAG meeting on 5 February that the states would:
- identify, manage and report on Commonwealth approved construction
projects and repair/maintenance programs in their jurisdiction;
- manage funding for successful proposals, with project payments
made on achievement of project milestones with 75 per cent of these new homes
to be completed by December 2010;
- ensure recurrent costs of new housing are met, with completed
dwellings to be owned by State governments or community housing providers; and
- progress reforms in the sector and report to COAG by December
2009 on these. Further details were outlined in Schedule C to the National
Partnership Agreement (see Appendix 3).
1.10
The initiative is also intended to stimulate the building and
construction industry, through funding the building of additional dwellings and
increased expenditure on repairs and maintenance. This stimulus to the housing
construction sector 'will translate into about 15,000 jobs over the next two years'.[6]
BACKGROUND
1.11
Housing assistance is an important part of the social and welfare
policies of the Australian and state and territory governments. In the past,
the Commonwealth, state and territory governments provided funding for public
housing and other housing measures through the Commonwealth-State Housing
Agreement (CSHA). The Commonwealth Rent Assistance program (CRA) also provides
an income supplement paid to eligible individuals who rent accommodation in the
private rental market.
1.12
On 29 November 2008 the Council of Australian Governments
announced a National Affordable Housing Agreement (NAHA) which brought together
existing Commonwealth housing and homelessness assistance programs. The NAHA
will provide $6.2 billion over five years from 2008-09. Under the Social
Housing National Partnership of the NAHA, the Commonwealth will provide $400
million over 2008-09 and 2009-10 for capital investment in social housing and
homelessness. This will increase the supply of social housing through new
construction, providing approximately 1600 to 2100 additional dwellings by
2009-10.[7]
1.13
Also recently established was the National Rental Affordability Scheme
(NRAS). NRAS is a Commonwealth Government initiative to stimulate the supply of
up to 50,000 new affordable rental dwellings by 2012. Under NRAS successful
applicants will be eligible to receive a National Rental Incentive for each
approved dwelling, on the condition that they are rented to eligible low and
moderate income households at 20 per cent below market rates.
ISSUES
Public and community housing
demand
1.14
Witnesses generally agreed on the need for additional public and
community housing units. Mr Frank Quinlan of Catholic Social Services noted
that there was 'enormous pent-up demand in the community and social housing
area' and noted that the '20,000 stock that is anticipated by this project only
goes some way to meeting the anticipated demand and the anticipated need'.[8]
1.15
Mr Simon Smith Executive Officer of Homelessness Australia emphasised
that timely access to housing is critical in responding to homelessness and
noted that currently half of all people with an urgent need for housing
assistance, including people experiencing domestic violence, must wait three
months before they are allocated housing. He also noted that the measures in
the Bill would support the Government's objectives, outlined in the White Paper
on Homelessness, to halve homelessness by 2020.[9]
1.16
The joint submission from the major church providers noted that an
estimated 100,000 Australians are homeless, including 14,000 who rely on
emergency accommodation. They suggested that while the cost of housing may be
easing for some, such as mortgage holders, others would suffer if economic
conditions worsened. They stated:
With physical constraints in rental markets expected to persist
over the next two to three years (that is, vacancy rates will remain at record
lows), there is likely to be little easing of rent prices in the short-term.
The greatest source of increased demand for housing services, however, is
likely to be increased risk of unemployment, which will leave some individuals and
families unable to meet their housing costs.[10]
1.17
Estimates in the UEFO project that the unemployment rate in Australia will
rise to seven per cent by June 2010. Mr Simon Smith of Homelessness Australia
noted that while the relationship between homelessness and unemployment was
complex it was important that a robust social safety net existed in a 'deteriorating
economic environment'. He stated:
It is always important, but with unemployment increasing and
with homelessness invariably increasing at the same time, an increase in public
and community housing will be very important to help us to address the fallout
that comes from that.[11]
1.18
The Australian Institute of Health and Welfare (AIHW) has indicated that
there has been a drop in the level of public housing stock, 'decreasing
nationally from around 372,000 dwellings in 1996 to 340,000 dwellings in 2007'.
The availability of low-rent housing in the private rental market has also not
kept pace with the increased demand by low-income households.[12]
1.19
The AIHW has highlighted a trend in government expenditure over the
period from 1994-1995 to 2003-2004. While CRA expenditure increased 9 per cent
over this period CSHA expenditure decreased 31 per cent. However the AIHW also
noted that these trends should be viewed with caution as the CRA is a recurrent
expenditure program driven by demand whereas the CSHA includes a capital
component that has resulted in public housing assets that are continually used
for housing assistance.[13]
Implementation
1.20
Implementation issues were highlighted by a number of witnesses and in
particular the role and capacity of state and territory housing authorities. Ms
Carol Croce of the Community Housing Federation of Australia noted the need
for clear public criteria so that the use of funds in the initiative could be
assessed. She also highlighted the need for strong accountability and
enforcement measures, 'something with teeth', to ensure that funds were used appropriately.
She stated:
The Prime Minister said that the government would be watching to
ensure that the stimulus funds do not replace existing state money and
programs. I think the states and territories must be accountable for how the
funds are spent in line with the Commonwealth targets and there must be a
strong enforcement component in any agreement that is signed. [14]
1.21
Similarly Ms Susan Helyar of UnitingCare noted that:
The other issue, I think, is to make sure that the systems in
place for rolling out the money are accountable and transparent, but also
simple. There are a range of legislative changes underway in states and
territories. I think making sure that the reform process going through the COAG
agenda continues to operate to reduce the red tape, administrative compliance
and burden on providers is important because that is one of the things that
slows down projects and diverts resources from delivering projects to reporting
on administering funding sources.[15]
1.22
FaHCSIA officers advised that scrutiny around the whole of the economic
stimulus package 'will be fairly vigorous'. Ms Peta Winzar stated:
We have provision in our agreement with the states to withdraw,
withhold or reallocate funding if they fall behind on their delivery
milestones. We will be monitoring their progress in terms of development
applications, development approvals, commencements, completions and tenanting
quite diligently, and we will be providing reports to our ministers on a very
regular basis. I think that at this stage it is proposed to have monthly
reports at headline level and then much more detailed reports at quarterly
intervals.[16]
1.23
The ACOSS submission also highlighted a number of areas which they
considered required clarification, including the definition of 'social housing'
and how social mix targets will be achieved.[17]
In relation to the social inclusion objectives of the initiative Mr Geoff Leeper
of FaHCSIA stated:
The guidance we have given in the national partnership agreement
certainly leads to a view that, if I can use the term salt and pepper
arrangements will be preferred rather than broadacre. We are not interested in
this package resulting in 200 social housing dwellings being put in a single
location. We are much more interested in buying 10, 15 or 20 per cent of a
larger development, be that multiunit or detached housing, which are for social
housing purposes, to sprinkle, so to speak, the social housing more
appropriately and equally.[18]
1.24
Professor Julian Disney stressed the importance of 'this additional
support for growth interacts effectively with other parts of the package that
the government has developed, especially the National Rental Affordability
Scheme' and the other housing initiatives and suggested an advisory panel on
the program as a whole be established.[19]
1.25
Mr Adrian Pisarski of National Shelter highlighted that when 'much of Australia’s
public housing stock was built, it was built for a different kind of family
structure than the ones we have now'. He stated:
Traditionally there are a lot of three-bedroom houses in that
stock. The demand these days is much more for four-bedroom-plus properties for
large families and for two-bedroom units, by and large. The stock has not
really been matching the demand.[20]
1.26
FaHCSIA noted that the Commonwealth did not intend to be prescriptive
with the states about types of dwellings and that the mix will depend very much
on the profile of clients on the waiting lists in each jurisdiction.[21]
1.27
Ms Croce also noted that the opportunities which existed in the
not-for-profit and community housing sector 'to leverage additional dollars
from the private sector maximising the stimulus funds and increasing the amount
of new, affordable housing stock for low and moderate incomes'.[22]
FaHCSIA officers stated that while there was not a specific target their hope
was that 'perhaps 75 per cent of the stock will eventually transfer to
community housing ownership'. Mr Leeper commented on the rationale for the
shift to community housing:
Initially we would like to diversify the provider base... A number
of the community housing organisations and not-for-profit housing organisations
of which we are aware are prepared to use the value of their balance sheets as
debt equity, subject to financial approvals, to further boost the supply of
social housing. So it is a way of leveraging the Commonwealth’s investment.[23]
1.28
A number of concerns were raised regarding the possibilities for state
housing agencies to sell down housing stock in response to additional
Commonwealth funding. For example Dr Silberberg of the Housing Industry
Association stated that there was an incentive for state housing authorities to
transfer public housing stock to the not-for-profit sector. He continued:
That relates to the eligibility for Commonwealth Rent
Assistance. Public housing tenants are not eligible for CRA, but those tenants
under the management of a community housing entity would be eligible. In
addition, public housing authorities are not GST free. Charitable organisations
can get approval for GST-free status, which means that those GST-free entities
can acquire social housing at a lower cost.[24]
1.29
However FaHCSIA officers noted that under the National Affordable
Housing Agreement the Commonwealth purchases housing outcomes and seeks to
measure 'access by Australians, particularly those in the lower two income
quintiles, to affordable, safe and sustainable housing'. Thus the Commonwealth
would not wish to prevent state and territory housing agencies from selling
some of their legacy stock which costs more to maintain and no longer meets the
needs of people who are seeking accommodation with the intent of using revenue
to increase appropriate housing stock.[25]
House construction sector stimulus
and job creation
1.30
Both the Housing Industry Association (HIA) and the Master Builders
Association (MBA) noted that the housing construction sector was slowing. Dr Silberberg
outlined that:
There are 25,000 private sector dwellings that have been
approved but not yet commenced. Most of those dwellings are multi-unit and
medium-density housing projects that have stalled, due in part to a lack of
investor confidence and interest but also due in part to a lack of working
capital. The stalling of those projects is placing jobs at risk in the
industry.[26]
1.31
Dr Silberberg highlighted that spot purchasing by state housing agencies
in some of the 'stalled' private sector housing developments could reduce risk
for providers of finance and allow projects to be implemented quickly. These
developments could generate an additional 85,000 jobs. The multiplier effect of
the funding for social housing was highlighted by Mr Wilhelm Harnisch of Master
Builders Australia noting that:
...as part of the economic stimulus package, this will very much
generate economic activity, particularly through the multiplier effects, through
manufacturing, obviously through the construction phase and then through the
retail phase. All this will provide much-needed jobs in this industry. We agree
with the HIA that the housing sector is very sluggish at the moment, so this
stimulus package will certainly be a welcome boost—not only, obviously, to the
social housing sector but, more importantly, to the economy and therefore to
jobs, which is very important in the current economic climate.[27]
1.32
Mr Frank Quinlan of Catholic Social Services stated that the downturn in
the construction sector meant there was likely to be available resources and
capacity to implement projects despite the 'ambitious target'.[28]
1.33
ACOSS reinforced the point that social housing investment makes economic
and social sense:
Investment in public and community housing will provide a direct
stimulus to the housing and construction industry while also responding to the
acute need for more affordable housing.
Investment in construction has clear flow on effects to other
parts of the economy, as the construction industry uses mostly local materials
and has a very large labour component.[29]
Environmental building standards
1.34
Concerns were raised regarding the energy efficiency standards of any
new social housing constructed. For example ACOSS noted that new housing should
be energy efficient 'to reduce the costs to tenants and minimise the
environmental impact'. [30]
However the HIA defended the current energy efficiency targets of new houses
being constructed and noted that most public housing stock was below the 5 star
rating for energy efficiency and that new buildings would meet these
requirements. Mr Chris Lamont argued that there is a bigger efficiency dividend
with respect to energy use to build five star rated houses and that
'[d]iminishing marginal returns set in with respect to going from five to six'.[31]
1.35
The HIA also noted that there was a lack of uniformity between states
and territories in relation to environmental building standards and this
complexity was a disincentive to development. Dr Ron Silberberg stated:
We have a plethora of regulation relating to the way in which
dwellings are to be prepared for the market. In some cases we have
manufacturers that have been so confounded by the differences in regulatory
requirements they have given up manufacturing and supplying in some states....Each
state and territory is operating on five-star energy efficiency, except in the
case of Queensland and Tasmania, which have agreed to move to five star—in the
case of Queensland, by next month.[32]
Ongoing obstacles to development
1.36
The MBA and the HIA both noted a number of ongoing obstacles to the
construction of residential developments which largely originated from state,
territory and local government. These included stamp duty charges, development
fees, planning approvals and consultation processes.[33]
The issue of waiving such fees and charges was raised with the Department:
Senator HUMPHRIES—Will any of the planning and
development processes be waived, fast-tracked or otherwise altered to make
these projects happen?
Mr Leeper—That would be a matter for the
states to decide. We certainly would be interested in raising with the states
whatever possibilities they could pursue to make sure that potential
construction that does not yet have development approval gets that as fast as
possible, but that is a matter for the states to determine.
Senator HUMPHRIES—So you are interested in asking
them but have not actually done that as yet.
Mr Leeper—Having executed the national
partnership agreement at COAG last week, we now need to do bilateral
implementation plans. We could potentially raise with the states in those plans
what they would be able to do or be prepared to do to get their governments’
support for fast-tracking development approvals, noting that that actually
involves the local government level, not the state government level.[34]
1.37
Departmental officers confirmed that the projects to be funded in the
first round of this scheme are ready for development.[35]
The term 'shovel ready' was used in evidence to describe this level of
readiness.
Charitable tax status
1.38
The Community Housing Federation of Australia (CHF) emphasised the
importance of understanding that the funding that goes into public and
community housing is spent entirely on housing. Due to the charitable status
that the community housing sector enjoys, and government status, funding is not
diverted towards stamp duty or transaction fees; it goes strictly into housing.
However, concern was expressed that uncertainty still exists about their
charitable tax status which needs to be addressed urgently. Ms Croce from the
Community Housing Federation of Australia commented that:
We took care of it for NRAS, at least in a stopgap manner, so
that the people participating will not have their charitable status challenged,
but I think, even though it is being examined as part of the Henry review, it
needs to be moved forward and dealt with more urgently so that the people who
are providing housing at a non-commercial rate do not feel that their
charitable status is in jeopardy if they are trying to provide housing through
this stimulus package.[36]
1.39
The Department reassured the Committee in respect of those who
participate in some of the housing measures from the stimulus package:
Our expectation is that most, if not all, of these 20,000 extra
dwellings funded under this package would go to people who are currently on the
public housing waiting list. We would therefore expect that they would be at
the very lower end of the income spectrum. I think, therefore, that that poses
much less of a problem for community housing organisations in terms of their
charitable status—because there is no question of them drawing a large
proportion of their income from people who the tax office might regard as not
being a charitable objective.[37]
1.40
The Department also noted that 'the broader issue of the existence of
charitable status organisations and their ability to play in a space, as it
were, where they might be seen to be delivering quasi-commercial services—for
example, housing—is a matter, I understand, which is likely to be considered by
the Henry tax review that is running through the course of this year'.[38]
CONCLUSION
1.41
While the Committee was asked to examine only the social housing aspects
of the Bill it is clearly a significant component of the Nation Building and
Jobs Plan – both in terms of the sizeable funding being allocated and the
significant housing needs being addressed. The social housing provisions in the
Bill received strong support from all witnesses to the inquiry. The evidence
which the Committee received highlighted that the stock of available public and
community housing has declined while the demand for these services has
increased, and is expected to increase further if economic conditions
deteriorate.
1.42
The provisions in the Bill will clearly benefit the housing construction
industry and will have a multiplier effect from additional purchases,
employment and other business activity.
1.43
While concerns were raised regarding the implementation of housing
projects and the efficiency of state and territory housing authorities, the
Committee notes that the Plan does contain significant monitoring and
compliance mechanisms.
Acknowledgements
1.44
The Committee would like to thank the witnesses for their cooperation
and willingness to speak at the hearing despite the tight timeframe of the
inquiry and a late scheduling change.
1.45
The Committee also records its thanks to the Parliamentary Reporting Staff
for their efforts in having a Hansard transcript of the hearing available
within a few hours of the hearing.
Recommendation
The Committee recommends that the provisions of the Appropriation
(Nation Building and Jobs) Bill (No.2) 2008-2009 relating to the social housing
program be passed.
Senator Claire
Moore
Chair
February 2009
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