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HAFFing and puffing


The federal government can set up the HAFF — its long-promised $10 billion Housing Australia Future Fund — after the Greens joined other crossbenchers to pass relevant bills through the Senate.

After months of wrangling, the Greens extracted significant concessions from Labor, notably an extra $3 billion for direct and immediate investment in social housing. In return, they deferred their demand for a two-year freeze on rents.

The deal should finance about 36,000 new homes over the next five years.

The HAFF is intended to fund 20,000 social housing dwellings, where rents are pegged at less than 30 per cent of household income. These homes mostly go to people who rely on government payments, and 4000 will be set aside for women and children feeling domestic violence and for older women on low incomes at risk of homelessness.

Another 10,000 HAFF homes are designated ‘affordable’. The parliamentary library’s Bills Digest says they are intended for ‘frontline workers like police, nurses and cleaners’.  These ‘affordable’ dwellings will be let at a significant discount to market rents. The Rudd government’s National Rental Affordability Scheme worked in a similar way, with homes let at 20 per cent below the prevailing rate for a similar property in a similar area.

The extra $3 billion extracted by the Greens should fund around 6000 dwelling beyond the HAFF scheme. (This assumes an average cost of $500,000 per dwelling — it’s hard to precise because land and construction costs vary around the nation and some money will be invested in supporting infrastructure rather than housing.) Of this, $2 billion flows directly to the states and territories via the Social Housing Accelerator so building can start immediately, bridging the two year gap until funds flow from the HAFF. The other $1 billion will boost the National Housing Infrastructure Facility administered by the National Housing Finance and Investment Corporation (soon to be re-badged Housing Australia).

The 36,000 homes for low- and moderate-income Australians financed by the HAFF and the extra $2 billion extracted by the Greens comes on top of a post-Covid surge in housing investment by states and territories. Housing expert Hal Pawson and colleagues from the UNSW City Futures Research Centre calculate these initiatives should add another 15,500 dwellings.


'This would ensure a stream of new building into the future at a modest cost to the budget and give Australia’s small community housing sector the certainty it needs to keep growing and providing new homes for Australians on the bottom rungs of the income ladder.'


All up, that’s an additional 51,500 homes by the end of the decade in a welcome return to public investment in housing after decades of neglect. It offers no longer-term certainty though, and still pales in comparison to the size of the effort needed.

There are 174,600 households on social housing waiting lists around the country, with about four in ten classified as ‘greatest need’ — in other words, they’re homeless or at risk of homelessness, fleeing family violence, or living in housing that makes them sick.

Hundreds of thousands of low-income households are in ‘rental stress’, scrimping on essentials like food, heating, and medicines, to shell out more than 30 per cent of their income to the landlord. ABS data shows that about 250,000 households spend more than half their income on rent.

Barely one in a hundred rentals is affordable for essential workers in full-time jobs, and vacancy rates are at record lows. Steady employment is no guarantee you can stay housed leading to a rise in the working homeless.

Planner Lawrence Troy from the University of Sydney told the ABC’s PM program that Australia would need to build at least 15,000 homes per year to maintain the current low share of social and affordable housing as a proportion of all dwellings, which has slipped from about 1 in 20 in 2001, to about 1 in 26 in 2021.

But in five years, once the first tranche of the HAFF is fully committed, there is no guarantee of any more building. This is where the HAFF differs from other Future Funds.

The $20 billion Medical Research Future Fund, for example, disburses upwards of $600 million a year for a wide range of health related projects. In theory, it can continue to fund new initiatives indefinitely into the future.

Once the 30,000 new HAFF homes are built, however, all proceeds from the fund will be tied up for decades. To understand why requires an explanation of how the HAFF works.

A minimum of $500 million dollars will be distributed from the fund each year, indexed for inflation thanks to Senator David Pocock. But these proceeds won’t directly pay for the construction of new homes— if they did, they would fund only 1000 new homes a year not the 6000 promised under the HAFF (again, assuming a cost of $500,000 per dwelling).

Instead, the annual $500 million disbursement will bridge the gap between the low rents paid by social housing tenants and the cost of building and operating new homes. Payments operate as a subsidy, giving community housing organisations sufficient income to access commercial finance to build new dwellings. In this way, the HAFF uses a modest public investment to leverage much larger amounts of private capital.

But the subsidy must keep flowing until the loans are paid off — which is likely to be 25 years. As Hal Pawson points out 25-year terms are standard under the smaller NSW Social and Affordable Housing Fund, which provides a model for the HAFF.

Another downside is the chunk of money that will spent managing the fund. Based on public reports from the Medical Research Future Fund, investment consultant Harry Chemay reckons this could be about 2 per cent of the HAFF’s value, or $200 million a year.

The Grattan Institute has long championed the HAFF. As economist Brendan Coates argues, future funds ‘can earn more than the government has to pay to borrow, meaning they can be a better use of government funds than paying off debt’.

But Grattan also argued that the HAFF should have been four times larger than it is, starting with an initial $20 billion from the federal government and another $20 billion from the states.

Unless something changes, in 2030, once all the proceeds from the initial $10 billion investment in the HAFF are fully committed, social housing investment will again grind to a halt.

So it’s surprising, that in all the Labor-Greens haggling over the HAFF, one bargaining chip was never put on the table: the government could have offered to top up the HAFF’s capital on an annual basis. If it had promised to add $2 billion to the fund each year, then by 2030 it would have another $10 billion generating investment returns, enough to finance and other 30,000 dwellings from 2030-2035, and every five years after that.

This would ensure a stream of new building into the future at a modest cost to the budget and give Australia’s small community housing sector the certainty it needs to keep growing and providing new homes for Australians on the bottom rungs of the income ladder.

The HAFF will make a difference to thousands of people struggling to find a place to call home. But it is more of a temporary patch than a permanent fix and much more must be done.




Peter Mares is a contributing editor to Inside Story and an adjunct senior research fellow at Monash University’s School of Media, Film and Journalism. He is a fellow with the Centre for Policy Development and a moderator at Cranlana Centre for Ethical Leadership. His books include No Place Like Home: Repairing Australia’s Housing Crisis.

Main image: (Getty images)

Topic tags: Peter Mares, Housing, HAFF



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Existing comments

If we keep bringing in to the country more people than we can physically build homes for, what do people think will happen to rents?

Russell Hamilton | 22 September 2023  

Surely it's more to do with less or lack of investment by state governments, with the Federal, in public and social housing for past generation, due to imported US 'free market' ideology; but any building contracts would be done by private sector contractors?

Another tactic to keep house prices high by crimping lower priced stock from entering the market (lowering median prices), and also blaming (undefined) 'immigrants' which also ignores impact of the baby boomer bubble and empty nesters.

Andrew Smith | 25 September 2023  

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