Housing & Homelessness

Quick-links to sub-sections:

Affordable Housing
Tenants Rights
Adequate and affordable housing must be a priority

Greens make submission to the Inquiry into the Allocation of Social Housing
The problem with shared equity schemes...Sylvia's speech

Affordable Housing

In October 2008, The Greens introduced an Affordable Housing Bill to NSW Parliament. This Bill attempts to amend the Environmental Planning and Assessment Act to allow Councils to ask for affordable housing to be included within new private developments, if there is a need for affordable housing. Councils, if they choose, will be able to impose a levy of up to 25% on a developer, who can supply housing or equivalent value, which a council then must use to provide housing elsewhere in the area.

You can read Sylvia Hale's speech on this Bill

Part 1: http://www.parliament.nsw.gov.au/prod/PARLMENT/hansart.nsf/V3Key/LC20081030044

Part 2:

http://www.parliament.nsw.gov.au/prod/parlment/hansart.nsf/V3Key/LC20081113038

Tenants Rights

A fair go for tenants

The government is reviewing the Residential Tenancies Act. Greens submission on the review of the Residential Tenancies Act (response to Office of Fair Trading discussion paper #2).

It is unclear where the review process is up to, or when we will see law reform - probably sometime in the first half of 2009. Sylvia Hale and The Greens will be consulting with tenants and housing organisations once the content of the legislative changes are known.

Key issues for the Greens are:
* The lack of boarders and lodgers' rights
* There is no limit on the amount of rent increase in NSW
* The low vacancy rate and upward pressure on rents means landlords now more than ever have the upper hand over tenants.

Adequate and affordable housing must be a priority

Sylvia wrote to the Federal Minister for Housing, Tanya Plibersek, and the NSW Minister for Housing, David Borger, to urge the Rudd Government to take meaningful action on housing affordability.

Housing Ministers were meeting in Canberra in December 2008 to finalise a new National Agreement on Affordable Housing. However signs of a much-needed and significant funding boost are not good so far.

Supply side measures are needed, according to NSW Greens MP and housing spokesperson, Sylvia Hale.

“Economist Ross Gittins nailed it in the Sydney Morning Herald when he pointed out that stoking demand when it outstrips supply only pushes up prices. Yet many of both Labor’s and Liberal’s recent announcements focus on increasing demand and will therefore push up house prices,” said Ms Hale.

“I made this point to the NSW Treasurer in parliament when he was trumpeting shared equity schemes – that increasing people’s access to credit or spending power just bids house prices up in a zero-sum game.”

“It’s obvious Labor is totally confused about what to do.”

“On the one hand, Mr Rudd’s proposal for tax credits for people who invest in affordable rental housing is a much more viable approach to the problem. It will assist renters who are under financial stress without pushing up house prices.”

“On the other hand, Mr Rudd’s comments alleging that local councils are delaying land releases are wide of the mark. The leaked Treasury document tells the truth – that land release is marginal as a factor in housing affordability. Developers will hang on to their lots until they can sell at their preferred price,” said Ms Hale.

“Mr Rudd’s comments appear to be part of an orchestrated campaign by the Labor Party, on behalf of the property development industry which is funding much of its election campaign, to take planning powers away from local councils and centralise them in the hands of NSW Planning Minister Frank Sartor.”

“Mr Sartor has shown no interest in policies aimed at genuinely addressing the affordable housing problem. He refused to allow inclusionary zoning for affordable housing beyond a pathetic 3% in new developments such as at the former ADI site at St Mary’s.”

“We need to increase the supply of affordable rental properties through a range of measures including increasing funding for new not-for-profit community and public housing, requiring at least 10% of all new housing developments to be set aside for affordable housing and offering tax incentives to increase supply at the lower end of the private rental market,” concluded Ms Hale.

The NSW government should follow the lead of its South Australian counterpart in taking action to stop the worsening crisis in housing affordability.

Ms Hale pointed to a South Australian law setting a target of 15% affordable housing in new developments.

“The SA law is a big step in the right direction. South Australian Greens MP, Mark Parnell, supported and strengthened it through measures such as placing covenants on affordable homes to ensure they remain affordable when resold.

“The SA legislation lays the framework for affordable housing targets of 15% of new developments, including 5% high needs housing. A variety of home ownership supply schemes are being developed.

Greens make submission to the Inquiry into the Allocation of Social Housing

The Greens have made a submission to the Inquiry into Social Housing Allocations.

It argues for a broadening and revitalisation of of social housing and an end to the narrowness of the 'Reshaping Public Housing policies of the Government.

It also highlights allocations being wrong for a tenant (for example, allocating a unit with a lot of steps for elderly people, or a small townhouse for a family with 5 children).

The Greens asked tenants for their views and received many responses.

The problem with shared equity schemes...Sylvia's speech

27 June 2007 - Hansard

DUTIES AMENDMENT (FIRST HOME PLUS ONE) BILL 2007

Ms SYLVIA HALE [4.43 p.m.]: The purpose of this legislation is to extend stamp duty and land tax exemptions and concessions to eligible first home buyers who purchase a home valued at up to $600,000 in the case of a house or $450,000 in the case of vacant land, where there is an equity partner. This will extend the concession, or a proportion of it, to the first home buyer who is purchasing part equity in a home but will require an equity partner—for example, a financial institution—to be liable for a proportion of the land tax. The bill supplements the existing concession regime for first home buyers and extends it to a shared equity situation. The Greens do not oppose the bill. We recognise that this concession will make it easier for a few first home buyers to buy a home by entering into a shared equity arrangement. However, we believe it is important to look closely at shared equity home loans and the dangers entailed therein.
With this bill we are not talking about a scheme that creates a government-assisted shared equity home loan in which the Government becomes a partner of the home buyer. We are not talking about setting up a scheme similar to the schemes operated by the Western Australian and Northern Territory Governments. In the Sydney Morning Herald on 30 March 2007 Annette Sampson described the Western Australian scheme:
Targeted at low to middle income first home owners, the scheme allows the government to buy up to 40 per cent of eligible borrowers' new homes while the borrower pays for the remainder through a low deposit home loan. The home owners are able to repurchase the government's share of their property as their finances permit.

The New South Wales scheme simply extends—in shared equity arrangements where the partner is a relative, friend or, more likely, a financial institution—concessions that are available to other first home buyers. Although shared equity home loans may extend home ownership to more people, it is necessary to sound a note of caution about these schemes, especially where the equity-holding partner is seeking to make a profit out of the arrangement. The Labor Party, both Federal and State, has seized upon shared equity instruments as a potential cure for the increasingly severe housing affordability problem.

The State Treasurer and Federal Member for Sydney, Tanya Pilbersek, who is Labor's national housing spokesperson, increasingly encourage people to enter into partial equity home ownership. In fact, the Commonwealth is admitting that, in the absence of such schemes, the average family cannot afford to buy an average house. The "cure-all" approach that it advocates is an admission of failure: failure to recognise the dimensions of the problem confronting the community; failure to recognise the risks involved in shared equity schemes; and failure to espouse long-term initiatives that will resolve the problem rather than exacerbate it.

Instead of focusing on the problem—wildly unaffordable housing—Labor is saying, "Oh well, if you can't afford to own a house, you can own half a house through a shared-equity arrangement." Is it really expected that shared equity schemes will help new homeowners into the market? That seems not to be the expectation of the major promoters of the scheme. On 14 May, the day after Rismark International, in conjunction with Adelaide Bank, announced its new shared equity mortgage, the Sydney Morning Herald economics writer, Matt Wade, analysed the scheme in an article entitled "Equity trade-off for bigger home loans". Matt Wade said:

The chief general manager of Adelaide Bank, Stephen Small, said the product would target first-time buyers lacking the full finances for entry into the home-owner market. Equity finance mortgages can be used by borrowers to buy homes that are up to 25 per cent more expensive than they might have been able to afford using a traditional home loan.
But the most important market for the new mortgage may be second-time buyers who want to purchase a more expensive property, or existing borrowers who refinance to reduce their monthly loan repayments.

That is the view of Matt Wade. It gives the lie to the notion that the scheme will assist many new first home buyers into the market. Shared equity finance was first championed about five years ago by Christopher Joye and Andrew Caplin in their paper entitled "A Primer on a Proposal for Global Housing Finance Reform". It was published under the auspices of the Liberal thinktank Menzies Research Centre Limited as a policy prescription for the housing affordability problem. Joye is now Managing Director of Rismark International, which is a financial institution specialising in shared equity home loans, through which he clearly hopes to profit by exploiting out-of-control housing price rises.

Private shared equity arrangements have pitfalls. They rely on house price appreciation. It can be argued that they help to stoke house price inflation because they increase purchasing power. The more easily finance becomes available, the more people will be anxious to buy even part of a home. The more competition there is, the greater the inflationary effect. The result could well be a zero sum game rather than a real solution to the problem because new home buyers will still be competing with each other as well as with investors and with people trading up.
Moreover, financial institutions can be expected to offer shared equity loans predominantly in areas where they anticipate the greatest capital gain occurring. Financial institutions can be expected to participate in a shared equity scheme only when they believe the house will appreciate in value, they receive a 40 per cent share of any capital gain, they are liable for only 20 per cent of any loss and the homeowner shoulders 100 per cent of rates and maintenance costs. As Nick Holuguie writes on the Urban Mag website, such schemes must turn a profit for the banks and are dependent on capital gains. He says that given the many risks, the land would have to be such that the value would appreciate quickly and there would have to be value in having purchasers signed up even though they could not afford to purchase the whole property.

Clearly, if this Government wants to champion shared equity home-ownership schemes, it should implement schemes as other Labor governments have done. The Government is, after all, a far preferable partner in such arrangements because the desire to make a profit from the arrangement is not—or should not be—central to its concerns. Government is able to borrow more cheaply than the private sector and government can afford to carry the equity for a longer period. However, risks still remain. The low-income borrower may default—as happened with thousands in the discredited HomeFund scheme—and the whole operation will still depend on the property appreciating in value. Notwithstanding such considerations, it is true that successful government-based shared equity schemes do operate in Western Australia and the Northern Territory. As Annette Sampson noted in an article in the Sydney Morning Herald on 30 March entitled "Warning on shared equity":

The more traditional shared equity schemes involve shared ownership, with the lender taking a stake in your home.
Western Australia's First Start program is a good example. Targeted at low to middle income first home owners, the scheme allows the government to buy up to 40 per cent of eligible borrowers' new homes while the borrower pays for the remainder through a low deposit home loan. The home owners are able to repurchase the government's share of their property as their finances permit.

She distinguishes this form of shared equity from the mortgage developed by Rismark, and stated:

The Rismark mortgage is a loan, not an equity product, and you retain full ownership of your home. But instead of paying interest on the loan, you give up some of your home's appreciation.

The broader picture is that housing is unaffordable. Prices and rents are too high for low- to medium-income households to cope with without plunging into housing stress; that is, spending more than one-third of their gross income on housing or rental costs. On 11 May the United Nations Special Rapporteur, Miloon Kothari, released a report on his mission to Australia that focused on adequate housing as a component of the right to an adequate standard of living. The report compelled the head of National Shelter, Adrian Pisarski, to note:

The levels of homelessness and housing poverty in Australia are unacceptable and require serious Federal Government attention. It is disgraceful for a nation as wealthy as Australia to be the subject of such a damning D.N. report.

The Greens could not agree more. We have no State housing strategy, no national approach to housing and no national housing Minister. What we do have is a taxation regime that encourages speculation in real estate to the detriment of a large section of the population. Negative gearing rewards and assists those who seek to buy a second house at the expense of those who possess no house at all. While investors benefit from the many tax perks available to them, those who are renting pay off the mortgages of investors and, as a result, are unable to save enough for their own home deposit. Even if they can muster a deposit, many cannot afford the repayments, and the longer they save, the further the goalposts are moved as house prices ratchet up. The solution for these people, according to Labor, is to get into a shared equity arrangement and to buy part of a house. However, this approach is fraught with perils for the unwary. As Annette Sampson outlined:

Like reverse mortgages, equity finance mortgages can have wide-ranging consequences, not all of which are easily foreseen. Where appreciation is high, they can be expensive and they are more complex than standard home loan borrowings. Their terms and conditions can also be more restrictive.

As I noted earlier, shared equity schemes rely upon rising house prices. Every time an investor-buyer acquires an extra property, relying on borrowing against their already accruing asset base, they out-borrow, out-spend and out-bid the younger renter household seeking to buy their first home. Even in ower-cost suburbs, such as Mount Druitt, aspiring first home buyers are being outbid at auctions by vultures such as the Property Secrets group, which is snapping up repossessed or ex-Department of Housing properties. For others who are forced to move even farther from Sydney to the Central Coast in search of affordable housing, the price they pay is a two-hour commute to work to drive buses, staff train stations, work in hospitals, and mop floors, and then do a two-hour return journey.
The microeconomic benefit of shared equity home ownership that accrues to the homebuyer is home ownership and consequent security of tenure. However, at the macro level, these benefits may be non-existent if such schemes feed house price inflation. The Government must be proactive on housing. There is nothing stopping the Government, through Landcom, from providing a greater number of reasonably priced, smaller homes to means-tested applicants for purchase or rent. Landcom already has a limited program. The Greens believe it should be expanded significantly. In order to maintain affordability, the Government must either retain some equity or place a caveat on resale to ensure that when a property is on-sold only means-tested applicants are eligible to purchase it.

The Government has been threatening—or promising—an affordable housing strategy for ages. We have heard promises, but seen nothing apart from a few minor announcements on a little bit more public housing, or a pilot program here and there. Minor announcements do not a State housing strategy make. The Greens do not oppose this bill, but ask the Government to explain its overall housing affordability strategy for New South Wales—if there is one—and to address the macroeconomic implications of shared equity schemes, such as the inflationary effect they may have on housing prices.