Australia's Housing Future Fund - my Senate hearing opening statement and submission
15 March 2023
Considering how obsessed this country is with property investment, it really puzzles me that the housing policy we have come up with to help households being squeezed in rental markets is to not invest in building housing.
A fund is stupid
This bill proposes using $10 billion to invest in non-home financial assets.
Satire and reality have met. In the political comedy show Utopia there is a scene where Rob Sitch’s character explains to a political staffer that building infrastructure today IS fixing the future, whereas a fund is just a risky, expensive, and unnecessary waste.
A great example is the Future Fund, which spent $500 million just in fees last year in order to lose $2.4 billion of value.
Do we really think that spending $20 million in fund management fees per year in a Housing Fund and $5 million on research, to risk losing billions is better than just building new homes?
This fund has been portrayed as a low-risk long term politically-insulated funding source. It is exactly the opposite—it is a high-risk fund that defers tough housing spending decisions to future politicians who now have an excuse to limit housing funding to $500 million.
Another perversity is that the fund is designed “to create a funding source”. Yet, the legislation just says that Treasury will credit the fund with $10 billion. Where is that money coming from? Why doesn’t it need a funding source?
Houses are assets
The NSW Land and Housing Commission manages the public housing stock in that state. The value of its assets increased from $32 billion in 2012 to $51 billion in 2020, a 7.8% compound return.
Australian dwellings increased 7.7% in value (net of rental returns) per year since 2006 when the Future Fund was established. The Future Fund? 7.8% per year.
Had the Future Fund invested directly in Australian housing instead of the financial products it did invest in, it would have made more money once you factor in some rental returns.
Perhaps instead of spending tens of millions a year managing the financial fund and doing further research, we could pay the Future Fund board to be mystery shoppers and simply go out in the property market and buy new dwellings, sometimes in bulk, at a good price from private developers, be it land and house packages, townhouses, or apartments.
This would put housing equity into the fund, increase the rate of new housing construction, and immediately grow a pool of housing to allocate to state public housing agencies, CHPs or, my favourite, by lottery to non-homeowner households.
More research not going to solve anything
The last thing we need is more research and more advisory bodies. We had the National Housing Supply Council operate for a decade and achieve nothing. Our population growth only hit their lowest simulation forecast, but our actual housing construction exceeded hit their highest simulation, demonstrating market supply met all estimates of adequacy.
What else is there to know?
On the data, we actually have planning approvals data in QLD showing over 20 years of supply already not just zoned, but with an existing planning approval. This is widely ignored because it is not in the interests of property owners to share that information.
It is sad that professional lobbyists whose interests are in higher prices, more tax breaks, and valuable upzoning decisions, have been so influential. I can assure you that if a public housing developer was created and began flooding the market with new homes, depressing rents and prices, as they claim to want, they would lobby against it.
If the Property Council is under oath today you can ask them if their members would be better off financially if housing rents and prices increased 20% rapidly or decreased 20% rapidly.
I’ll bring these points together, with an example.
There is a build-to-rent project known as Smith Collective on the Gold Coast, being the former 2018 Commonwealth Games athlete’s village. Two and a half years after the Games the manager told me that
since opening in 2018 the precinct has been on a staged release strategy so as not to flood the rental market.
This was in Jan 2021. So they left hundreds of already-built dwellings empty for two years as a way to stop rents from falling.
The funny part of this is that the project was funded by a middle eastern government’s sovereign wealth fund—their future fund—because the Queensland government thought investing in new houses in its own state was a bad idea.
Thanks for reading Fresh Economic Thinking! Subscribe for free to receive new posts and support my work.
That is a cracker of a submission.
I notice there is a gravy-train of "community housing" providers lining up to support the HAFF - presumably on the basis that they will get grants that they might not get if money was spent directly on public housing. I give side-eye to anyone talking about "community" or "social" housing, because the terms are usually deployed deliberately to avoid mentioning public housing - the actual solution.
I once spent a night volunteering with the Property Industry Foundation. For all their talk of "wrap-around support" and "building life skills", they only provide temporary accommodation at best, and ultimately aim to make their "clients" productive enough to afford market rent extraction rates. All of which suits the property industry just fine, while they go sailing for a "charity regatta" (actual event). They NEVER talk about public housing or any form of below market permanent housing. That's not profitable for their sponsors. A charity that truly cares would campaign for policies that make their charity no longer necessary, not this neoliberal self-improvement claptrap.
In a quick scan of the submissions, surprise! The Property Council wants an "industry reference group" (so they can capture the "independent" board). Surprise! AHURI supports more research. Surprise! The Community Housing Industry Association wants to be put on equal footing with states and territories when it comes to grants ("[optimising] the outcomes" with "robust tendering"), presumably so they have a chance to forestall any actual public housing by undercutting it (based on capex only...).
The whole thing is a bucket of vomit, and should be tipped in the toilet.
Cameron, I appreciate this is only one small part of your paper, but in the interests of accuracy, on what are you basing your statement about there being 20 years worth of planning approvals in Queensland? Having worked in Queensland land supply and development monitoring for many years, I do not understand how you could arrive at that statement. For example, the most recent published SEQ Land Supply and Development Monitoring Report (2021) identified 4.4 year of approved but uncompleted residential lots (subdivision approvals) and 9.1 years of approved but unconstructed multiple dwelling approvals (without considering how many of these are likely to be feasible and proceed - historically a significant proportion of the latter in particular tend to fall over or be replaced by other approvals for the same land before development actually proceeds).