Building our way out of social housing unaffordability may no longer be possible

Few would deny that social and affordable housing is in short supply in Australia. The 'social' part of this refers to homes rented out by public housing departments and not-for-profit community housing providers to very low-income Australians, usually at 25% of the tenant's income.
But, as highlighted by Guardian Australia, the growing class of 'affordable rental housing' is less clearly defined. In general terms, it is a product that targets the growing population of low-to-moderate-income workers earning above the rock bottom income eligibility thresholds for a social tenancy, but who are hard-pressed to find a suitable home in the private market.
The main problem this product seeks to solve is that our private rental sector has been 'going upmarket' for decades. That is, generating fewer and fewer homes affordable to people in the lowest two-fifths of the income spectrum – including those in the second income quintile, ineligible for social housing.
Census-based evidence shows that, as a result, Australia's national shortfall of affordable and available private rental dwellings for renters in the second income quintile almost doubled in the 15 years to 2021 – up from 87,000 dwellings to 152,000 dwellings.
The problem has been exacerbated by a quarter of a century of negligible social housing growth, even as need for such accommodation has shot up thanks to rising population and inequality. Thus, as a share of our national housing stock, social housing has declined from more than 6% in the 1990s to barely 4% today.
State and territory governments have been rationing remaining tenancies ever more tightly as a result, more or less restricting these to households reliant on social security payments.
This is why the low-income workers essential to the operation of the modern urban economy nowadays have next to no chance of a public or community housing tenancy. It is also one reason that Australian governments have taken a growing interest in enabling an 'affordable rental housing' product that could make it possible for people in this situation to live reasonably near their work.
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At a big picture level, this is a problem that, according to conventional wisdom, can be tackled by expanding overall housing supply. But it is doubtful that 'building our way out of housing unaffordability' is even possible. And, without major complementary actions, it is unimaginable that such a strategy could significantly moderate market rents in the short-to-medium-term future.
At least in the meantime, there is a case for governments to enable affordable rental housing construction as well as invest in expanding social housing. They can do this in one of two ways. The first is by directly subsidising housebuilding – such as under federal programs, including the Housing Australia Future Fund (Haff), which promises 20,000 new affordable rental homes by 2029.
The second approach is the deployment of land-use planning or tax powers to require or incentivise private providers to include affordable rental units within market-price housing developments. The New South Wales and Victorian state governments, for example, have recently introduced or beefed up 'density bonus' schemes allowing developers to build higher and bigger, provided that projects include units renting at below-market prices. Using tax powers, the federal government has adopted a similar approach for Build to Rent projects.
Under schemes of this type, affordable rents are typically defined relative to comparable market rents – often capped at 75-80% of local norms. When operated in high price areas like Sydney's Bondi, such a formula of course produces rents that sound outrageous outside that local context.
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Such homes might possibly assist the junior teachers, nurses and police officers so beloved of ministerial media statements, and there is an arguable case for policymaker attention to such housing needs. But this model is liable to produce rents far out of reach for low-income essential workers. And such units are, anyway, often required to be made available for only 10-15 years.
But while it would be hard to justify directly funding 'affordable housing' of this kind, such homes are, in fact, generally produced through planning or tax concessions that represent only indirect government support.
It is to be hoped that, on equity grounds, the directly subsidised affordable rental housing to be generated under the Haff and other ongoing federal programs will be subsidised sufficiently to produce units genuinely affordable to the low-income worker (or second income quintile) cohort.
Equally, equity considerations dictate that the bulk of government financial support for social and affordable housing should be devoted to the former. It is only through expanding our minimal remaining stock of deeply subsidised housing that we can similarly expand access to secure and affordable homes for the most disadvantaged Australians.
The bigger picture here is that, despite the expanded social and affordable housing investment committed under the Albanese government, Australia is still spending nowhere near enough to decisively reverse decades of neglect in this area. The case for phasing down private landlord tax breaks, with the resulting additional revenue redirected to expanding such investment, remains compelling.
Hal Pawson is a professor of housing research and policy at the University of NSW and associate director of the UNSW City Futures Research Centre. He is the lead author of the Australian Homelessness Monitor series

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