Written by:
Mark Fowler
5 December 2016
The Productivity Commission has today released its Report ‘Introducing Competition and Informed User Choice into Human Services: Identifying Sectors for Reform’.
The Productivity Commission identified six areas as a matter of priority ‘where outcomes could be improved both for people who use human services, and the community as a whole’. Those six areas are: – social housing – public hospitals – end-of-life care services – public dental services – services in remote Indigenous communities – government-commissioned family and community services. The report provides detailed commentary on the Commission’s views on how competition may improve service delivery in these areas.
In relation to social housing, the report highlights the benefits of Government stock transfers to community housing providers. It reaches the following conclusions:
- Introducing greater competition, contestability and user choice could improve the effectiveness of the social housing system in meeting tenant needs.
- There is substantial room for improvement in the current social housing system. There are long waiting lists, poorly maintained and underutilised properties, and a lack of information available to allow governments to select and monitor the performance of government and non-government service providers.
- Four out of five social housing properties are managed by government entities, yet there are a large number of housing providers — both not-for-profit and for-profit — that could perform this service.
- There are currently not enough social housing properties to meet demand, limiting the housing choices available to social housing tenants. Nonetheless, approaches implemented internationally allow social housing tenants greater choice of home. Reform options could be explored in Australia to address supply constraints and increase the housing options available for prospective social housing tenants. In particular the Report highlights choice-based transparent letting schemes currently in use in the United Kingdom and Netherlands.
We will continue to analyse the study report. A copy of the report may be accessed here.
Affordable Housing Working Group Report to Heads of Treasuries Released
The ‘Innovative Financing Models to Improve the Supply of Affordable Housing’ Report to Heads of Treasuries authored by the Affordable Housing Working Group has been released. The Working Group was asked to investigate innovative financing models aimed at improving the supply of affordable housing.
Having considered four differing models, the report recommends a bond aggregator model, similar to that operated by the United Kingdom Housing Finance Corporation. The model involves a financial intermediary that aggregates the borrowing finance of many community housing organisations, thus enabling the issuing of bonds on their behalf at competitive rates.
In July 2014 this firm recommended a similar model in its submissions to the Commonwealth initiated Centre for Social Impact Inquiry into civil society regulation. The following excerpt from our submissions further explains the concept:
The creation of a body to play the key role of a financial intermediary, channelling investment and distributing funds to the charitable housing sector should also be considered. Such a body may take the form of an Australian affordable housing finance corporation. As noted by Lawson et. al:
A financial intermediary, in general, links suppliers of capital with appropriate investment opportunities and creates aggregation benefits and efficiencies in doing so. A specialist intermediary, in particular, can:
Develop further efficiencies in undertaking due diligence because of its specialised knowledge of the business;
Lower transaction and search costs considerably (as these are much the same for raising $25 million as they are for raising $250 million);
Ensure a pipeline of projects and funds is available, which reduces search costs by preventing projects being lost because funds are not available when required;
Inform and educate both investors and providers about risk and returns; and
Assist in making CHPs investment ready; and provide access to funds for smaller players (and those who are financially excluded) that are unable to directly raise private sector finance and, hence, maintain diversity in provision.[1]
A comparison of international efforts discloses that certain jurisdictions have effectively employed a financial intermediary model as a means of enhancing the supply of accommodation:
Special purpose housing banks in Austria are licensed to sell tax privileged bonds for limited profit housing development; and
The Housing Finance Corporation (THFC) in the United Kingdom operates as a not-for-profit financial intermediary pooling the investment demands of smaller providers of affordable housing.
The Working Group’s report concludes that a second model, being that of housing trusts, ‘warrants further investigation, particularly due to its ability to provide affordable housing at a significant scale’.
The Group concludes that the two other models investigated, being housing co-operatives and impact investment ‘although important funding and delivery mechanisms, … were not capable of generating the required scale of investment’ that the Group was charged with promoting’.
Importantly Scott Morrison has announced that at the Council on Federal Financial Relations meeting on Friday, the Australian Treasurers ‘agreed to the report’s recommendations, in particular the establishment of a bond aggregator taskforce. The taskforce will design a bond aggregator model and report to Heads of Treasuries by mid-2017′.
The Report may be accessed here.
[1]Julie Lawson, Vivienne Milligan and Judith Yates, ‘Housing Supply Bonds—a suitable instrument to channel investment towards affordable housing in Australia’, [2012] AHURI Final Report No. 188, pg 64.