Understanding the housing policy levers of Commonwealth, state and territory, and local government
An overview of demand and supply side policy levers
Recent commentary in the media has pointed out that the increase in housing affordability stress for lower income households is ‘being driven by a web of decisions being made by all three levels of government'. Just what are some of the major housing policy levers, controlled by Commonwealth; state and territory; and local governments?
In essence, the Commonwealth Government has responsibility for the policy levers impacting on housing demand; while state and territory, and local governments are mainly responsible for the policy levers impacting on housing supply.
The Commonwealth Government’s main impacts on housing demand, and therefore HAS, are through the taxation benefits given to investors (i.e. negative gearing and capital gains tax reductions) and population increase (or reduction) through migration policy (whether that policy is explicit or implicit).
Social housing investment
Investment in social housing supply may reduce HAS by increasing housing options for lower income households. The Commonwealth Government invests in states and territories to increase social housing and other forms of affordable housing supply through the National Housing and Homelessness Agreement. (NHHA).
The Commonwealth Government is also encouraging large scale investment by in social housing provided by community housing providers (CHPs) through an affordable housing bond aggregator as part of the National Housing Finance and Investment Corporation (NHFIC).
Welfare support and Commonwealth Rent Assistance
The Commonwealth Government provides Commonwealth Rent Assistance (CRA) to households renting in the private market that are receiving welfare benefits. These payments can reduce HAS for eligible tenant households.
Major infrastructure funding
The Commonwealth Government invests in major infrastructure projects in partnership with the states and territories, as a part of their City Deals program and through the National Housing Infrastructure Facility, which helps local governments fund the high costs of building critical infrastructure. These investments, such as improving road and rail networks, may benefit tenant households by enhancing their access to regions with greater employment opportunities.
If lower income householders can obtain work that increase their wages then their level of rental stress drops. However, if property owners increase rents when infrastructure improves employment prospects for these same households then tenants may be in a worse financial position if they are not able to gain employment that actually increases their income.
Public and community housing
State and territory governments have an active role in funding and providing public housing in their jurisdictions to householders on welfare or low incomes. They also enable CHPs to manage and increase levels of social housing through transferring housing management (and sometimes ownership) to the CHPs.
Major infrastructure funding
As with the Commonwealth Government, state and territory governments invest in major infrastructure projects that can reduce (or increase) HAS for lower income households.
State/ territory governments are also responsible for funding and providing infrastructure such as public transport, hospitals, roads and state primary and secondary schools that can affect affordable rents in a particular area or region.
State and territory governments oversee the release into the market of non-residential land for development so as to increase housing supply, which may reduce HAS. A proportion of this increase in housing supply will become available for renting households; as an example, in Mernda, an outer growth area suburb of Melbourne characterised by new estates of detached housing (87.2% compared to the Australian average of 72.9%), 27.6 per cent of households are renting in the private sector.
The state and territory governments will also assess the environmental impact of developments, and can overturn planning restrictions for new housing imposed by local councils, which may impact on housing supply. They may also impose Inclusionary zoning rules which require developers to include affordable housing dwellings in their developments or to make payments so that affordable housing projects can be built elsewhere.
Stamp duty and Land Tax
State/territory governments set and collect any stamp duties and land taxes that are applied to property sales and transfers. Such taxes and duties increase costs for home buyers, and for investment properties they passed on to tenants through higher rents.
Local government is responsible for zoning laws applicable to their district. These laws may determine building sizes, heights and qualities (including building materials) relative to land sizes and positions. Heritage overlays may also restrict what types and sizes of developments are possible in specified streetscapes and historical precincts.
Local government zoning laws may also include Inclusionary zoning rules that serve to increase affordable housing dwellings in the local government area.
Local government is responsible for minor infrastructure projects such as local libraries, roads, drainage schemes and small scale bridges. Such projects may increase the desirability of living in a particular area, which in turn may increase rents and HAS.
Local government sets and collects all council rates that are payable on residential properties. These costs are passed on to tenants through higher rents.
Figure 1: Housing policy levers of Federal, state and territory, and local governments