Friday, 27 July 2012

Queensland's Budget Crisis in Housing

I mentioned previously that I am very skeptical about the Queensland Government's supposed budget crisis.  I believe it has been greatly exaggerated by the Newman LNP Government as an overarching story to justify cuts which are essentially ideological. 

Recent events in the housing portfolio, dear to my own heart, have confirmed this suspicion.  New housing minister Bruce Flegg, who has no history of involvement in housing issues, started his tenure by announcing that (shock! horror!) Queensland's public housing system is losing $2m per week, and is struggling to cope with the demand for housing from low income tenants.  He proceeded to float a number of ideas for "improving" the system, most of which involved moving tenants on from their housing in some form.  He advocated alternatives including shorter leases, compulsory transfers and asking single tenants in large housing to share if they are not willing to move. Then this week he has announced, without warning, that he is discontinuing funding for the Tenant Advice and Advocacy Services (TAASQ), which provide free advice and support on tenancy law issues.

So a little background on housing policy.  The Queensland Department of Housing, which manages a little over 50,000 dwellings which are rented to low income tenants, does indeed run at a loss.  This is not new - people involved in housing policy have been writing and talking about financial viability problems in the public housing system for the past 30 years. 

The reason for this financial issue is not hard to find.  The housing has to be acquired and maintained at market prices and staff have to be paid full award wages to manage it.  However, the system is specifically set up to house people on lower incomes, and the income profile of public housing tenants has got lower and lower over the past three decades as governments target their housing more tightly to high need households.  Because the rent they pay is geared to their income, it is well short of market rent and so the system runs at a loss. 

The way this is played out in practice is that the rent is able to cover the basics - staff wages and overheads, day to day maintenance, rates and insurance.  However, the depreciation of the buildings is not fully funded, and so as houses and units get old and run down there is no money in the system to replace them.  They can only be replaced by selling other buildings, or by the government putting in extra money.

Of course this is only a problem is you think it is.  If you look at public housing as a closed financial system, then yes it runs at a loss and will eventually cannibalise itself, selling houses to fund the operation until there are none left.  Hence, the system is not financially viable.  But who said it should be?  Who said it was a commercial operation which had to meet its own costs?  In fact, this plainly is not the intention of any government.  The system is intended to support low income people who can't afford market rents.  The loss the system makes is the subsidy needed to provide people with limited resources the opportunity for decent, secure housing.  This is a legitimate - indeed essential - service for a government to provide and it comes cheap at $2m per week for 50,000 households.

But Dr Flegg has a classic case of Dunning and Kruger syndrome - he doesn't know enough to understand the depth of his ignorance.  So he has proposed a range of measures which frighten the socks off public housing tenants but which will have little impact on the finances of the system.  Like the Coalition members who ran the state for decades up to 1989, he wants to make the system more punitive and push out tenants who are not in "genuine need".  This will, in fact, make the losses greater because those with more capacity to pay rent will be moved out of the system, while simultaneously reducing the quality of life of the tenants it is supposed to help.  Everyone will lose.  It is a classic conservative party approach to welfare, focusing on rationing and the deserving poor and demonising those who are seen to be greedy or underserving. 

Which brings me to TAASQ.  Dr Flegg has indicated that given the financial crisis facing public housing, he can no longer afford to fund this service because he needs to direct all available funds towards housing people.  Dr Flegg either doesn't know, or doesn't care, that TAASQ is not funded out of the public housing budget.  It is funded almost entirely from the interest on bond money held by the Residential Tenancies Authority - that is, from private sector tenants' own money.  It enables disadvantaged tenants who are not able to assert their own rights in disputes with their landlords to get free help.  It helps prevent many of them from becoming homeless.  It is a crucial service, especially given the vast majority of disadvantaged tenants are not, in fact, in public housing but struggling to pay rent in the overheated private rental market.

This is the money Dr Flegg wants to appropriate to help prop up the public housing system.  It won't go far and it certainly won't solve the core problem.  The core problem is that politicians (and Labor ones are not much better than LNP ones on this matter) want to have their cake and eat it.  They want a system geared to housing the most disadvantaged households in the State, and they don't want to pay a cent for it.  Does this strike you as good financial management?

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