Gary Humphries (ACT, Liberal Party) Share this | Hansard source

I am pleased to contribute to this debate on the National Rental Affordability Scheme Bill 2008 and the National Rental Affordability Scheme (Consequential Amendments) Bill 2008 and to reinforce the message that is being delivered by, I am sure, all sides of this chamber: our concern at the affordability of housing. What is important is not, however, the extent and the sincerity of our concern. What is important is the extent to which we are able, through legislation, to actually make a difference to the issue of housing affordability and housing accessibility in this country. That is the crucial test of any government on the question of housing affordability.

There is no doubt that Australia faces a serious challenge at the present time in that housing affordability is a very real problem for a large proportion of the Australian population. The solutions to that problem are not simple, however, and I think it is worth understanding a little bit about the background to that before we pass this legislation. Senator Feeney made the comment that there had been a dramatic fall in housing affordability during the later years of the previous government. He laid that problem at the foot of the previous government, suggesting that we had neglected housing policy during that time. I want to put a few facts on the table to make Senator Feeney, and others who might buy that line, think again. Firstly, during the whole of the life of the Howard government, real wages were rising in Australia. Those real wages were rising after taking into account increases in the cost of mortgages. Whilst it was getting more difficult, in many respects, to obtain affordable housing, this was not due to the fact that living standards were falling. On the contrary, living standards were rising notwithstanding the increasing cost—as a result of increasing interest rates—of mortgages.

The problem with housing affordability in Australia in the last few years has stemmed not so much from increasing demand as from the failure to deliver increased supply to keep up with that demand. If one looks at the structure of Australian government, it is obvious that the federal government does not have a great capacity to increase the supply of available land. There are some areas where opportunities exist for Australian federal governments to increase land supply, but that is very much on the margin of this problem. At the core of this problem of housing affordability in the last few years have been policies by state and territory governments to restrict the release of new land into the marketplace. As a result of such policies, that land which was released became much more expensive. Whilst returns to state and territory government coffers increased—which was no doubt part of the reason for these policies—housing affordability became an increasing problem for many people. This emphasises the fact that these problems cannot be solved at any one level of government. They must be solved at several levels of government—not only at state and territory and federal government level, but even at local government level.

In that respect I might say that one of the disappointing elements of this legislation is that we have a contribution being made by state and territory governments to this scheme which, on the face of it, is much smaller than the contribution being made by the federal government—or, if you like, by the federal taxpayer. I think it is fair to say that, in many respects, state and territory governments are being let off lightly in this arrangement. For each dwelling that becomes eligible for a subsidy under this scheme—a subsidy of $6,000 from the federal government—there is a matching subsidy required of state and territory governments of only $2,000, and even that can be delivered partly in kind rather than in cash. When one bears in mind the benefits that flow to state and territory governments in these circumstances in the areas of stamp duty and other benefits, one might say that the state and territory governments are not really doing the heavy lifting with this scheme. I may come back to that theme a little later on.

We, on this side of the chamber, do not begrudge an initiative of this kind in the attempt to deliver more affordable housing to those people who are in the rental market. It must be a very important focus of government policy in the next few years. We do, however, question the government as to whether or not it has thought through all the elements of this scheme, and whether it will, in fact, deliver major changes in the levels of affordability of housing in this country. Let us even take the extent of the government’s ambition in this area and consider how much that actually will change the landscape with respect to affordable rental housing. Let us bear in mind that next financial year it is expected that there will be a shortfall between demand and supply—of both rental housing and housing for purchase—in Australia of something like 200,000 units. This scheme, on the government’s own projections, will provide only about 10,000 new dwellings into the marketplace to address that problem, leading to an attack on the problem which could, at the best estimate of the government, only reduce the shortfall in the demand for housing by something like five per cent. So, even on the government’s own estimates, this is not going to solve the problem of unaffordable rental housing in this country.

There are other elements of this scheme which I think deserve to be carefully considered by the government and by all senators. We are confronted with a scheme where, as I mentioned, the federal government provides a subsidy of $6,000 to landlords who build new accommodation, which is contributed to by state and territory governments with a further $2,000 subsidy, so we have a subsidy of $8,000 per dwelling per year for the 10 years of the operation of the scheme. On paper, that is a very good contribution towards more affordable housing. But let us consider that the average rent in Australia at the moment is something in the order of $20,000 a year. Therefore, for a landlord to deliver a subsidy to the tenant of 20 per cent off the average rent or the rent payable for that property would, on average, contribute a benefit to the tenant of $4,000 per year. We need to ask ourselves: are we getting the best value for money for the Australian taxpayer by handing over to a landlord a flat benefit of $8,000 per year to deliver to the tenant an average benefit of only $4,000 a year? Some people might say: is it not better to deliver, or is there some way of delivering, that $8,000 benefit directly to the tenant so that there is greater capacity on their part to afford housing in a tight market?

The government’s response to that problem has been that we need to make a much larger subsidy to the landlord than he or she delivers to the tenant in order to encourage the building of new housing in the marketplace. That may or may not be true, but it depends very largely on whether or not the economics of this proposition actually work. The Senate Standing Committee on Community Affairs, which conducted the inquiry into this legislation, heard evidence that bodies such as the residential property council have highlighted that certain minimum passing yields would need to be achieved before it would be an attractive proposition for landlords to build and then take advantage of the subsidy available under this scheme and that the passing yields projected by the architects of NRAS, the National Rental Affordability Scheme, were actually lower than the minimum that the residential property council speculated would need to be provided.

The committee did hear that there was substantial interest in the scheme on the part of landlords, and we welcome that fact. It is appropriate for builders and others to be interested in making the scheme work and participating in it. But, if those figures from the residential property council, representing property owners in this country, are indeed accurate, there may be a significant problem with buying into this scheme. It is already clear from the evidence presented to the committee that the government is expecting a very small buy-in—directly, at least—by not-for-profit organisations. I think the figures suggested to the committee were that about half of the subsidies provided in the first year of the scheme’s operation would be coming from the not-for-profit sector and it was anticipated that that would fall over the life of the scheme. So it is important that the propositions on which this scheme is based are financially viable and that they do stack up in the eyes of the private sector. It is not at all clear at this point whether they do or they do not.

What is also concerning is that we do not have any evidence available to us about the broader impact on the housing market of this scheme. There is no economic modelling on the operation of the scheme, and that does give rise to some concerns. For example, if we have a particular community where there is a relatively modest shortfall of supply over demand, and if the scheme is used to deliver a number of dwellings which more or less meet that shortfall and you then find existing landlords in the marketplace whose capacity to rent their properties is compromised because the next-door property receives a subsidy of $8,000 a year which their property does not, do we run the risk that some existing operators may choose to pull out of the marketplace because they are not eligible for a subsidy? Perhaps that is not a widespread problem, but, frankly, no-one can be sure about that because there has been no modelling done on the operation of the scheme.

What difference it makes in particular communities as to how the scheme is delivered will depend a lot, of course, on where the scheme is actually rolled out—where projects are approved. Senator Payne made reference in her remarks to the way in which the scheme will be delivered as being a very important part of whether it works or it does not. I would prefer to have seen some indication of how it would affect existing operators. That was not available to the committee. We are also aware that those with existing accommodation cannot move their accommodation into the scheme—say, by conversions of certain sorts, which can only occur in certain circumstances—and that is also a matter of concern.

We are also concerned with the fact that the subsidy is a flat subsidy. It is $8,000 for everybody. If you are building in a particular marketplace where the rental is low, then the subsidy you have to deliver to your tenant in order to attract the government subsidy is relatively small, but the size of your benefit from the government remains the same. That might have the effect—unless the government is able to prevent that occurring by the way in which it rolls out the scheme—that in some parts of Australia we see a rush to take advantage of this arrangement where rents are relatively low but in places where housing stress is most severe, like Sydney and Melbourne, we do not see a great take-up because the extent of the subsidy that the landlord needs to deliver is about equal to the extent of the subsidy that he or she receives from the government. In those circumstances, why would a landlord want to be involved unless they had some altruistic motive?

Given that we have seen evidence that the not-for-profit sector is not anticipated to be the major player in this new scheme, particularly with the uncertainty surrounding the charitable status of not-for-profit organisations in the long term, it is important to understand what motivates players in the private sector and consider whether they will think it is attractive to invest a lot of money in a marketplace—which is under stress but in which rents are high—when they may not get a good return vis-a-vis the subsidy on their investment. Again, this is not a condemnation of the scheme; it is simply pointing out a possible weakness in it. Frankly, coalition senators would rather see a sliding scale where the level of subsidy is pitched to meet the extent of the need in a particular marketplace. I think it is inappropriate to consider that a property in, say, Mount Gambier should attract the same level of subsidy as one in inner Sydney.

I mentioned previously that I thought state and territory governments had been let off lightly under this arrangement. It is their constitutional responsibility to deliver for the housing needs of their communities, particularly when it comes to state housing schemes for those unable to afford to rent in the marketplace. They have a primary responsibility to do so, and under this scheme—on paper at least—they are lifting about a quarter of the total burden of delivering the scheme. It may be that in some cases they will do more than they are required and will provide more than the $2,000 per annum per dwelling subsidy, but I would not count on many state and territory governments being overly generous in that respect. So that is a matter of concern.

I also want to put on record a concern that the coalition senators identified as to the way in which the scheme will actually be delivered. It concerns a more technical detail but it is one that is of considerable concern to us. We are told that the legislation contains no criminal penalties. One might say that is appropriate for a scheme delivering housing benefits. But the concern that has arisen on our part is that it is up to the landlord to identify whether a tenant is eligible for the subsidy. The tenant does not go through the government to establish that fact. The landlord needs to be satisfied that the tenant falls within the particular income brackets that qualify for the benefit. If it so happens that the tenant lies to the landlord about that, it is extremely unclear as to what the consequences of that particular action might be. In fact, it appears to us that there are no circumstances in which the tenant will be prosecuted for this. The landlord may end up losing the subsidy retrospectively—and this could amount to tens of thousands of dollars over a period of time—if it transpires that the tenant was not eligible for the subsidy. But, because there is no penalty applying to the tenant for providing false information to the landlord, there is arguably no comeback against that tenant; there is possibly civil action but certainly nothing criminal.

I ask members of the government to consider whether that is a weakness in the scheme which needs to be addressed. That is quite apart from the question, if there are cases that come to the attention of the media of people rorting a scheme designed to provide accommodation to people on low incomes, of what kind of impact that might have on the way in which the public views a scheme of this kind.

Other senators have touched on the question of the status of not-for-profit organisations and whether they can continue to have charitable status and meet the NRAS criteria. I welcome the government’s decision to clarify this issue for the next two years, but I point out that this is a 10-year scheme, not a two-year scheme, and those in the not-for-profit sector participating in the scheme need to be satisfied that they can make a 10-year commitment to these things and not put their charitable status at risk.

I cannot understand why this issue was not cleared up long ago and why the government did not rush to indicate that there is no question or doubt about this and that it will provide that the not-for-profit organisations who want to be involved do not risk their charitable status under the tax legislation. But the fact that a two-year guarantee only has been provided suggests to me that the government does have serious doubts about whether it can or should do that in the longer term. If that is the case, I would not blame any not-for-profit organisation for hesitating to take on this commitment, because the cost of losing that status would be a severe penalty to that organisation despite the benefits that they might obtain by taking part in the scheme.

I emphasise again that the opposition does not oppose a measure of the kind that would deliver more affordable housing to the Australian community, particularly rental housing. This measure is welcome in principle. But good intentions are not enough to ensure that those people in Australia who need this kind of accommodation will get it. It must be delivered in a sound and responsible way. The government has said that the scheme has great flexibility. It may need that flexibility to ensure that what we see as the weaknesses of their scheme do not bring it down. The test of this measure will be in its execution.