The Housing Australia Future Fund: A flawed proposal for a rental crisis

Judith Sloan, economist and regular contributor for the Australian recently wrote an excellent expose on the Federal Government’s flawed housing plan. We have looked at Ms Sloan’s concerns, and agree that she has summarised One Nation’s position well.

The rental housing market in Australia has been facing tremendous pressure due to long waiting times for social housing and rising rents. Given this situation, it is not surprising that the federal government is seeking to throw money at the problem, the Greens are barking at their heels on the left and soaking a lot of votes over rental prices. Australians are hurting in an environment entirely of Labor’s making – high inflation (including in the housing sector) because of excessive government spending and exploding immigration.

However, one of Labor’s proposed solutions - the Housing Australia Future Fund (HAFF) - has been criticised as one of the most imprudent government policies ever suggested.

The plan is for the government to raise $10bn in debt and get the Future Fund to invest the funds. The net returns will then be invested in social and affordable housing each year. From the expected average annual return of $500m, the plan is to invest in a total of 6000 social and affordable dwellings each year. However, these numbers are extremely modest considering that at the current rate of population growth, we need at least around a quarter of a million new homes just to accommodate the extra people. It is also estimated that there are at least a half-million people on the current waiting lists for social housing.

Furthermore, at $500m each year, it works out as just more than $83,000 a dwelling funded by HAFF each year. This sum is not enough to cover the full costs of construction and land. Will this sum be used to subsidise other financiers by, for example, subsidising the gap between the market and actual rents paid by low-income tenants? It is unclear what the government thinks it can achieve by allocating just more than $83,000 a dwelling.

The HAFF is essentially a bet on the equity risk premium that generates higher returns than the cost of the debt. If this were really a good idea, it should be extended to all forms of government spending, which, of course, no one thinks is a good idea. The only explanation seems to be the political value of cashing in on the Future Fund brand and having a perpetual entity.

In the meantime, the rental crisis is becoming grimmer as each month passes. The vacancy rates in many parts of the country are at historic lows, and the annual rate of increase in rents ranges from 10 to 30 per cent. Rents are gobbling up higher proportions of tenants’ incomes, for those who can find suitable accommodation in the first place.

Just when it's clear that the rental situation is dire and becoming worse, the federal government has facilitated a substantial surge in the number of migrants entering the country, particularly international students but other temporary entrants as well. Before the pandemic, the annual net overseas migration (long-term arrivals minus long-term departures) was 240,000 in 2019. On current trends, NOM will end up between 350,000 and 400,000 this calendar year. Combined with natural population growth, that’s more than the entire population of Canberra – although the migrants don’t live in Canberra but largely in Queensland (also Melbourne and Sydney).

The Treasurer has tried to justify this surging migration by making the point that there was a substantial hiatus during Covid, and we are only making up for the “lost” arrivals. What he fails to mention is that the pandemic was also associated with a substantial stalling in the building of new accommodation that is needed to accompany strong population growth. In other words, the last thing we should do is try to make up for these “lost” arrivals. It’s a clear case of the government implementing inconsistent policies.

The HAFF is ill-conceived and won’t do anything to alleviate the rental crisis any time soon. It’s also too small to have any real impact. On the other hand, egged on by pro-immigration Treasury officials and other vested interests, the government has decided to open the floodgates for even more migrants to come here and take homes away from Aussies desperate for accommodation.


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