By Hal Pawson

The Albanese Government’s flagship housing legislation has stalled in the Senate, with the PM alarmingly flagging a risk that the package might be abandoned until the next election.

To understand what’s going on here we need to wind the clock back to the ALP’s platform taken to the 2022 election. Let’s remember that, when it comes to social and affordable housing, the backdrop to that contest was a decade of federal inaction. Granted, the action of then Treasurer Scott Morrison in setting up the National Housing Finance and Investment Corporation (NHFIC) to provide ‘cheaper debt finance’ for low-cost housing providers had been a positive move. But there was no serious government money behind this, nor any real ambition.

In 2022 Federal Labor, still reeling from its 2019 election defeat, had walked away from the modest landlord tax reform proposals Bill Shorten had taken to that contest. Albanese’s 2022 housing platform was, nevertheless, a reasonably broad ranging bundle.

The centrepiece was the Housing Australia Future Fund (HAFF), a plan for a $10 billion equity investment, with estimated annual returns of $500 million to be channelled into social and affordable housing construction subsidy. By this means, it was promised, the Albanese Government would build 30,000 social and affordable homes in five years – a pledge later expanded to 40,000 under the Treasurer’s National Housing Accord unveiled at the October budget.

This breaks down as 20,000 social housing dwellings, homes targeted at social security recipients and other very low income earners; plus 20,000 affordable rental homes – more modestly discounted tenancies aimed at low income workers.

Although there’s little published detail on how this might work, it’s understood that the HAFF was modelled on the NSW Government’s $1 billion Social and Affordable Housing Fund. Set up in 2016, this saw 3,500 social and affordable homes being built or acquired by community housing organisations (CHOs). Government enabled this by contracting with CHOs to pay them an annual subsidy over 25 years to bridge the gap between their rental income and their management, maintenance and finance costs over this period.

The HAFF hits trouble

The HAFF legislation has hit trouble in the Senate for several reasons. With the Coalition rejecting the bill in keeping with Peter Dutton’s general default stance, crossbench critics have leveraged their ‘casting vote’ position by pushing for more ambitious and ‘more reliable’ commitments. This has brought together the Greens, the Jackie Lambie Network and Senator David Pocock.

Their main complaint is that the HAFF financial commitment is inadequate. There are two aspects to this. The first – probably shared by the government – is that the Fund’s expected annual yield may be no longer sufficient to underwrite the promised investment program. Soaring construction cost inflation over the past year has raised serious doubts on whether the pledged program remains deliverable without a significant funding top-up over and above the $10 billion commitment.

A second, and more strongly voiced criticism is that – even at the promised size – the construction program itself remains far too small to make any serious dent in the scale of social and affordable housing need. Considering that there are over 160,000 very low income households on waiting lists across Australia, and over 400,000 currently experiencing unmet need for social housing, this criticism is well-founded. On this basis, the Greens are advocating for annual investment of $5 billion – ten times the pledged amount.

At the same time, of course, 40,000 new social and affordable homes enabled through federal funding over coming years would be 40,000 more than Australia has seen over the past decade, so there’s also a need to recognise that – even on its currently proposed scale – this is a significant commitment.

The critics might be more willing to adopt this ‘glass half full’ perspective if there was an explicit assurance from Housing Minister Julie Collins that the current HAFF proposal must represent only a first step towards a more ambitious longer-term program. A program that, it would be hoped, would be underpinned by the government’s forthcoming National Housing and Homelessness Plan.

Reliability concerns

A third objection to the HAFF voiced by the Greens is that the Future Fund model is in any case too risky, since investment returns will naturally vary from one year to the next. It seems that the model’s appeal to officialdom is that, being backed by income, funds generated in this way can be logged as ‘off balance sheet’ expenditure that is more palatable for the government accounts.

In practice, it’s hard to see how government could avoid at least implicitly guaranteeing future expenditure on HAFF projects irrespective of variable Fund returns, having signed long-term subsidy contracts with housing providers (or possibly with super funds pledging low-rate lending). With this in mind, it is also difficult to understand why the Minister avoids the explicit assurance that could at least help to calm this aspect of the debate.

With Minister Collins having failed to satisfy her Senate critics, the HAFF debate has now been paused until Parliamentary sittings resume next month. In the meantime, it will be hoped that the Budget will provide an opportunity for an official pledge to top up investment commitments to assuage the government’s progressive critics.

The bigger picture

Beyond all this, it’s important to emphasise that the HAFF is only one element of Labor’s housing policy package. Complementary reforms in the governance of housing policy show welcome recognition that beefing up social and affordable housing investment is far from a cure-all for Australia’s housing affordability challenge.

Alongside the National Housing and Homelessness Plan, the re-establishment of the National Housing Supply and Affordability Council, and the creation of Housing Australia as a national housing agency help to fashion conditions for more significant progress.

But if such is to be achieved, a far wider set of reforms will be needed. Within this, Albanese will have to face up to revisiting the Shorten manifesto’s landlord tax reform plans. Perhaps, in the light of dawning recognition that Australia’s tax system needs to focus more on wealth and less on income, that will even chime with evolving official thinking.

This post was first published on John Menadue’s Pearls and Irritations site. Read the original version here.