Productivity Commission suggests redirecting support from first home buyers to people facing homelessness

The Productivity Commission has suggested governments phase out financial assistance for first home buyers and redirect that support to those on the brink of homelessness.

In a wide-ranging new report on housing in Australia, the commission put forward a range of recommendations it believes will ensure more people have a roof over their head.

The report’s authors have suggested that the money set aside for grants to help people buy their first property would be better spent on programs and policies that assist people at risk of homelessness.

The review also found Commonwealth rental assistance was not sufficient or fair, and in some cases had been handed to households that don’t need the support.

It recommended that rent assistance be reviewed by the federal government as a priority.

Housing and homelessness services are mainly a responsibility of the states and territories, but the federal government provides about $1.6 billion every year through the National Housing and Homelessness Agreement (NHHA).

The review was tasked with looking at the NHHA, which aims to improve Australians’ access to secure and affordable housing.

It was scathing of how the agreement operated and stated it had done little to improve affordable, safe and sustainable housing for all.

Commissioner Malcolm Roberts said the agreement was largely administrative and did not encourage reform.

“The NHHA is intended to improve access to affordable housing, but it is ineffective,” Mr Roberts said.

“It does not foster collaboration between governments or hold governments to account.

“It is a funding contract, not a blueprint for reform.”

The current agreement has been extended until 2024 and the report has suggested that major changes be made to future agreements, which include increased funding and combining all housing programs under the agreement, including rent assistance.

During the election campaign, the federal government announced it would develop a National Housing and Homelessness Plan, but there is no date on when that will be finalised.

First home buyer support should be ‘targeted’

During 2020 and 2021, more than 55,000 people received assistance from state and territory governments to buy their first home.

Grants and stamp duty concessions cost governments about $3 billion in 2020 and the federal government has promised to establish a national shared equity scheme. 

The report raised questions about whether first home buyer support programs were value for money.

“It is not typically home buyers who benefit from the assistance, it is the sellers who receive a higher sale price,” the report said.

“What this means is that assisting home buyers can [somewhat counterintuitively] make housing less affordable, particularly for people who do not qualify for assistance.”

It has recommended that state and territory governments phase out assistance or make it more targeted.

“The case for governments providing assistance to help people buy a home is not strong unless it is targeted at specific cohorts who experience persistent marginalisation in the housing market.”

In 2020-21, about 278,300 people were helped by specialist homelessness services but 114,000 requests were turned away.

More than 100,000 people on any given night are considered homeless.

Mr Roberts said while $3 billion was spent on supporting first home buyers, only $1.2 billion was spent on homelessness services.

“The demand for those services is continuing to rise and there are a lot of people seeking help who cannot be supported. We feel there is better social return from supporting people who are in greater need,” he said.

While he was not supportive of stamp duty concessions, he noted that the report suggested state and territory governments work to phase out stamp duty and replace it with a broad-based land tax.

Housing and Homelessness Minister Julie Collins insisted the federal government programs that assist first home buyers were worth the money.

“One of the commitments that we have with the regional first time buyer guarantee, which is about supporting 10,000 eligible Australians into home ownership, which is very targeted, it has price caps, it has income caps, and of course, it has a targeted number of placements,” she said.

She refused to be drawn on whether money for first home buyer programs should be reallocated to homelessness programs as suggested by the productivity commission.

“We need to build the evidence base about what the different tiers of government’s role is and how that’s best placed to work to get more homes on the ground,” she said.

The report found low interest rates in recent years had assisted many people in entering the housing market, with about two thirds of Australians now owning property.

But overall ownership rates are falling, with the sharpest falls among middle-income households.

And there are now less younger people buying, with the rate falling from 44 per cent in 1998 to 36 per cent in 2020.

Change Commonwealth Rental Assistance

More Australians are renting for longer than in previous decades, and on average about 25 per cent of a renter’s income is now spent on rent.

In June this year, advertised rents were more than 9 per cent higher than a year ago and the vacancy rate was 1.2 per cent, which is lower than 2021.

About 1.34 million renting households receive Commonwealth rental assistance (CRA) at a cost of $5 billion a year.

The review recommended the government consider an increase to the rate, and said there was a “strong case” for change.

Mr Roberts said the review should be a priority for the government to improve the CRA’s adequacy and targeting.

“(Rent assistance) has been indexed to inflation but at times, rents have increased more rapidly than inflation,” he said.

The report found that even after receiving rental support, many people still experienced high rental stress.

However, Mr Roberts said they also found that 28 per cent of people who received the payments in 2019-20 didn’t need them.

“The other thing that we have identified is that there are a proportion of the recipients who are not in rental stress, and would not be in rental stress if they didn’t have access to the rent assistance payment,” he said. 

“So there are some people who are receiving that payment but it’s not needed to prevent them from falling into rental stress.

“We think there are possibilities for tighter targeting of this payment.”

Ms Collins has dismissed the recommendation to consider increasing the rate.

“It’s not something that we’re considering,” she said.

“Our priorities (are) delivering on our election commitments, we’re talking about a $10 billion housing Australia Future Fund, we’re talking about 30,000 social and affordable homes in the first five years of that fund.”

Housing supply a key problem

The report also stated that housing would be more affordable if more properties were available.

Figures show that there are about 411 dwellings for every 1,000 people in Australia, which is among the lowest rate of housing stock per person in the OECD.

Land and constructions reforms are the responsibility of the states and territories.

The report found that despite planning and zoning reforms being a priority in the NHHA, significant reforms have not been achieved.

It has recommended a number of changes including allowing more dense development around key transport corridors, changing zoning rules that currently only allow single detached houses and allowing more secondary dwellings.

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