model for public housing Submissions

A model for Public Housing NSW

Housing: An Essential Service

Present Housing Issues:

  • Lack of secure and affordable housing impedes access to educational and employment opportunities for low to moderate income earners and students in job-rich areas.
  • Higher expenditure on transport infrastructure is then required to transport workers and students to their destinations, restricting labour market mobility.
  • Insufficient housing supply in job-rich areas (e.g., Inner Sydney) also pushes up house prices which are further accelerated by low interest rates and asset speculation.
  • Speculation on housing has contributed to the enormous rise in house prices. Over 90% of investor finance is for existing housing stock rather than new dwellings (ABS). The tax advantages of property ownership have grossly favoured higher (often older) income groups over those on lower incomes and non-owners.
  • Commitment by buyers to large mortgages commits large sections of the population to long term mortgage servitude which restricts their ability to access other goods and services.
  • Over commitment by lending institutions increases the risk of destabilising financial markets, particularly lending institutions.
  • Diversion of savings to mortgages and the over investment in private home ownership diverts resources from more productive uses.
  • Since 2008, while the cost of owner-occupied dwellings nation-wide rose by 18.6%, the cost of renting rose by almost 31%, nearly double the CPI. Government is failing to ensure an adequate supply of rental accommodation.
  • Australian cities are blessed with highly desirable precincts that with growing internationalisation are attracting foreign ownership, often to the disadvantage of resident non-property owners.
  • Older inner city areas lend our cities their unique character. There is a need to preserve and enhance the built environment in such areas. People don’t travel across the world, from interstate, or even across the city, to look at high-rise buildings.

The Rationale for Change – a New Model

We propose a rental-only housing model that would address these issues and would be largely self-financing in the long term. The current housing policies of both Liberal and Labor are based on an economic rationalist approach in which government housing assets are valued at current market value and sold off if their value is sufficiently high.

This is not a social policy; it is the government acting as a private investor playing with a large pool of assets.  But democratic governments are not created by society to play at being investors. They should invest in socially useful projects from which the whole society continues to benefit over time.

And, it should be noted, this so-called “rationalist” policy does not apply, for example, to most users of other government created assets. Commuters are not expected to pay the present cost of buying the land for and building say, Central Railway Station or the Harbour Bridge. Neither are visitors to state-owned libraries and art galleries, and nor should they as the public have paid for these in the past. But housing is as essential a service as health care. So why should it be treated as if the government, as a provider, is a private investor?

Instead, over time governments should maintain and expand housing supply as an essential service to meet social needs. These could be met through the revenue from a reasonable market-linked rental for those on good incomes to provide a surplus for cross-subsidising quality social housing for those on low incomes.

As with other long-held assets the average cost of each rental unit would reduce over time with only maintenance and expansion at the margin requiring funding.

A long-term scheme of this type could be likened to Medicare.  People pay as a proportion of their income during their working life and receive the same service in old age as a proportion of their pension or superannuation. If individuals wanted to take on the costs, risks and benefits of private ownership then that would be up to them but it should explore policy measures that equalise the option of either renting or buying such as offering a rebate on rent for non-home owners

Existing state-built housing could either be controlled directly by government or by suitable not-for-profit organisations. When the need for housing grew, additions to the total stock of housing for rent would largely be built by government near to areas of need using its existing land assets or where required by buying land. Rental properties could also be built by non-profit co-operatives. Of course investors could still build for rental but would now be in competition with a not-for-profit sector to provide housing for all income groups.

Funds to underwrite location-specific projects could be obtained from stamp duty and other state property taxes, as an ongoing income stream on a pro-rata basis. Governments, with access to historically low interest rates, could borrow on behalf of the administrators of rental co-operatives to build housing projects. Implicit in the above view is that we reject the idea that the sale of existing public housing be used as an ongoing source of funding.


The Model

We propose that suitable tracts of state owned land, particularly in inner-city areas (e.g.within Sydney’s Bays Precinct) be retained in public (or community housing) ownership and developed for rental accommodation across a wide range of tenant income levels, including tenants who are able to pay market rent in keeping with the policy of social mix.

The rents collected from those paying market rents would subsidise other social and affordable rental units as determined by the governing authority (Housing NSW or another suitable government or co-operative body).

The state would use its resources to administer and provide supplementary subsidies, where required, to the income of the rental housing enterprise with the main function being to ensure adequate maintenance.

Its finances and sound administration would be monitored by independent audit. While some housing enterprises might require ongoing state subsidies, others could become self-sustaining co-operatives that use rents to maintain flexible rental accommodation.

The Cowper Street example

In NSW, applied to the current Glebe Affordable Housing Development proposal in Cowper Street, Glebe, this model would divide the development into five blocks. The three blocks recently slated for sale would be retained in public ownership for rental purposes.  At Cowper Street:

  • All tenancies would be administered by Housing NSW or another suitable government or co-operative body reporting to the Minister for Housing.  All five blocks
  • They should include a mix of units of between one and three bedrooms and no greater than four storeys.
  • Tenancies in any unit should be available to all categories of tenant depending on need and availability. No distinction would be made between social, affordable or market rent units.
  • There must be a baseline for social and affordable units. In Cowper Street, at least 50% of the units should be available to Social Housing tenants, reflecting the nature of the longstanding community, and the government’s commitment to rehousing tenants displaced by demolition or sales of homes in inner city areas.
  • Tenants paying market and affordable rents will raise the level of revenue received above the present average for social housing. If the premises are transferred to a wholly government-owned corporation such as CityWest, tenants in receipt of Centrelink benefits may be entitled to rent assistance.
  • The affordable housing component would target workers who need to live close to places of employment or education in the area.
  • Cowper Street provides an opportunity to champion low-cost innovative sustainable design, in keeping with the heritage values of Glebe.

A competition could be held to produce a design that integrates with the surrounding cultural and built heritage environment.

Social Impacts

  • The scheme would allow access to housing without commitment to a lifetime of mortgage repayments. It would offer security of tenure, offering significant advantages in this over the private rental market.
  • The social assets created by relationships within established communities would be recognised as paramount rather than mere market value.
  • Access would be through a waiting list with tenancies offered on the basis of a formula that would maintain a proportion of market and affordable tenancies to support social housing tenants within the same project/complex.
  • The scheme would reduce the impulse to speculate on housing, an essential service.
  • Policies that equalise the benefits of renting with home ownership would also encourage such projects. Tax revenue saved by a cap on negative gearing (currently estimated to cost over $5 billion in lost revenue per annum) could finance tax concessions or rebates on rents.
  • In this model, common areas maintenance would be the responsibility of the renters’ co-operative and private interiors would be the responsibility of tenants and a small insurance premium would be part of their rent. Over time, rebates would accrue to those who do not claim and premiums may rise for those making higher than normal claims.


If applied widely and at sufficient scale, this model would reduce the burden on the public purse for each unit of social housing but without reducing the overall commitment to social housing.

It would also allow workers on moderate to low incomes to find suitable secure housing near their employment without committing to risks such as rising interest rates on large mortgages.

In NSW, by adding to the supply of affordable rental accommodation, the model addresses the housing shortage, without the NSW government losing valuable land, and without the decimation of existing communities.

With 16,000 new dwellings mooted for the city’s Bays Precinct, we believe that a significant portion of this new development should be reserved for housing along the lines of the model outlined above.

Without displacing the private rental market, the model introduces some genuine competition by providing secure and affordable tenancies for the wider public across a range of income levels.