Operating deficits and public housing: policy options for reversing the trend: 2005/06 update

Summary

Mindful of the difficult issues facing public housing in Australia, and in need of more current information on operating deficits, the Housing Ministers Advisory Committee (HMAC) requested that AHURI update the earlier 2004 report on operating deficits in public housing (Final Report No. 55, from AHURI project 30154) which covered the period 2000/2001. This update found that although government-assisted or sponsored public housing represents a key component of affordable housing in Australia, at end of the 2005/06 financial year the total stock of public housing has again fallen well below that which applied in 2000/01. The erosion of the level of public housing stock over this period is similar to that which occurred over the previous five-year period. The rate at which these deficits are growing, and the time at which deficits outstrip current real levels of grant funding, are matters of critical policy concern.


Project Number: 30359
Research Theme: Public_and_Community_housing
Project Leader: Berry, Mike
Funding Year: 2005
Research Centre: RMIT-NATSEM

Description

A key constraint for mainstream public housing is that the net revenues after rebates at least pay for operational costs, (net of interest paid or received). If this is not the case, any addition to stock expands the additional funding requirement to pay for the deficit. In these circumstances the only option for reducing or freezing the additional funding requirement is to sell stock and therefore reduce the number of households provided with longer term assistance. The rate at which these operating deficits are growing, and the timing of when they will outstrip current real levels of grant funding is of critical policy concern. Clearly continuation of the current trends may carry with it the risk of a potential paralysis of housing assistance policy development, and a possible forced withdrawal to private rental subsidies as the only method of continuing housing assistance, with the possibility of a future fiscal blow-out.The aims of this project were therefore to: clarify the impact of public housing operating deficits on the development of comprehensive and expansive housing assistance policies; develop suitable policy options for returning public housing to operational surpluses; and by so doing; provide a context for more comprehensive and expansive housing assistance policies.

The project addressed four key research questions:

  • How should operating deficits be defined? (addressed by discussion paper, and research questions).
  • What are the trends in operating deficits and are they or are they not restricting stock additions to public housing? (addressed by public housing accounts analysis and CEO questionnaire/interview)
  • What are the reasons for the development of operating deficits and what are the influences of particular cost components? (addressed by public housing accounts analysis and CEO questionnaire/interview)
  • How can the components of operating regimes be benchmarked, what are the relevant international comparisons and what policy options can housing authorities introduce to improve outcomes? (addressed by benchmark literature review, analysis of overseas benchmarks and comparison with SHA's and Productivity Commission benchmarks).

More Information

Download now Final Report: No. 106: Operating deficits and public housing: policy options for reversing the trend, 2005/06 update
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