Community sector offers a solid platform for fair social housing

The Victorian government’s recently released housing strategy allows for the transfer of the state’s public housing stock to the community housing sector. In a recent Conversation article, Kate Shaw raises an important question – “Why should the state wriggle out of public housing?” – and condemns the transfer of public housing to private developers for redevelopment.

However, if one is really interested in providing more housing for people on low to moderate incomes, the community sector is the way to go – not public housing.

Criticism of community housing provision – in part because of its role in the UK’s liberal market reforms to public housing – neglects the reality. Community housing has underpinned the growth and viability of what many would see as some of the fairest and best-performing social housing systems in the world — those of Sweden, Denmark and the Netherlands.

Management and/or ownership of land (including state land) by not-for-profit community groups ensures affordability in perpetuity. It is not lost to the private sector. And it can provide the same security as public housing, but with more innovative management practices, such as co-operatives and housing trusts.

Not-for-profits serve a range of needs

Importantly, in the Australian context, the not-for-profit sector offers a range of housing options pitched at different household needs. These include rental housing for households on low and moderate incomes and affordable home ownership.

One reason for this flexibility is that, unlike government instrumentalities, Australian community sector providers can borrow against their assets. In the appropriate financial environment (as exists in the aforementioned social democratic countries), they can then grow their asset base to meet a broad range of housing needs.

And it does appear we are slowly moving toward such a financial environment. In its budget in May, the federal government announced the creation of a National Housing and Finance Corporation (NHFC) to offer community housing agencies access to lower-cost loans. While cheaper loans are not the full financial answer (there is still a substantial yield gap between rents and loan costs), the government has established an expert panel to look at this and report back later this year.

On top of these developments, the recent Productivity Commission draft report on human services, including social housing, recommends growth of the sector including an increase in Commonwealth rent assistance. This is vital for community housing viability.

International trends aligned with the direction of policy reform in Australia suggest the not-for-profit community sector is the future for social housing growth. And this could be done in a way that addresses Shaw’s other concern — the privatisation of public land.

On this, I agree with her. Losing valuable, well-located land to the private sector creates an enormous opportunity cost; once sold it will never be available for future use.

And all we might get out of it is a 10% increase (a few thousand units) in social housing stock. But merely to keep social housing stock at the current 3.5% of all housing (the lowest in Australia) we need at least an additional 31,000 in Victoria by 2031.

Making up for decades of neglect

We do have to acknowledge that decades of underinvestment in Victoria’s public housing has left a legacy of housing estates that have gone well beyond repair and maintenance. And, given their low density, these estates are not achieving their potential in terms of either number or quality of dwellings.

In this context, the fact that the state government has set aside $185 million for its Public Housing Renewal Program is to be welcomed.

Some argue that the less-than-ideal result of a public-private partnership renewal of the old Carlton estate demonstrates that mixing public and private housing is problematic.

But what if it was a mix of public and community-managed rental and ownership housing instead?

The community sector can act in the same role as a private developer (with the state not expecting as big a financial reward), renewing the site with a mix of affordable properties for sale.

Unlike conventional private ownership, these would be covenant-protected to ensure, as with equivalent models in the US, that home ownership remains affordable. While privately owned, the properties remain within the affordable housing stock. A community housing association manages their sale and resale.

Also, the rental housing could be a mix of public and community housing. The focus would be on both high-need deep-subsidy households and moderate-income low-subsidy households. Such transformed estates would be genuinely integrated mixed communities, rather than an uneasy balance of high-need public housing at one end and high-end private housing at the other.

Across Australia, many community housing organisations have demonstrated their ability to deliver successful public housing renewal projects with a mix of households and tenure types. They have done so in an integrated and cohesive way, with privately owned units underpinning the financial viability of the projects.

Transfer of stock to the community sector is an important and valuable process of substantial community benefit, both in its own right and as part of a considered process of estate renewal.

Shaw is right. We need much more social housing, and relying on the private sector to drive the process will have an enormous opportunity cost. This will very likely constrain the capacity for future growth and affordability.

But the leaves in the tea cup suggest that the bulk of future growth should be in the not-for-profit sector. The sector can grasp the opportunities offered by policy reform in a way the public sector cannot, and provide sustained affordability and security.