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On the 13th of September, an important housing policy of the Australian Federal Governmentis about to become law. The Green Party has announced its support for the bill, pledging to allocate an additional $1 billion Australian dollars for public and community housing expenditures this year.
"The Housing Australia Future Fund (HAFF)" bill, proposed by the Labor Party and valued at $10 billion Australian dollars, had previously passed in the House of Representatives earlier this year. Prior to that, the bill had been a focal point of political contention as it struggled to gain sufficient support in the Senate.
As of now, the bill has successfully passed both the Senate and the House of Representatives on the 13th and 14th of September respectively, becoming a new law (Collins & Albanese, 2023).
Background of The Bill
The objective and purpose of the HAFF bill are to address the housing crisis in Australia by providing more affordable and social housing options. The fund aims to finance the construction of 30,000 new affordable and social housing units within the first five years by utilising dedicated investment instruments linked to the stock market. This initiative is expected to alleviate the housing market's tight conditions and offer affordable housing choices, especially for low-income households and vulnerable social groups. It signifies that the government is taking action to mitigate the housing crisis rather than relying solely on market uncertainties.
Australia has experienced steady population growth, particularly in major cities like Sydney and Melbourne. This population growth has led to a rapid increase in the demand for housing. Since the reopening of Australia's international borders in February 2022, a large influx of international students, new immigrants, as well as numerous tourists and businesspeople has poured into cities, resulting in a sudden surge in demand for rental housing. This has placed significant pressure on Australia's rental market. Meanwhile, urban development has also exacerbated housing demand. The growth of business hubs and commercial centers, as well as the construction of education and healthcare facilities, has attracted large populations to urban areas, further increasing housing demand.
As of March 19, 2022, according to the most recent "Rental Affordability Snapshot" by Anglicare Australia, there were 45,992 rental properties across Australia. However, the findings indicate that only 7 of these properties were within the budget of single individuals relying on JobKeeper Payments, and just 1 was affordable for single individuals depending on Youth Allowance (Schatz et al., 2023). Even for families living on the minimum wage, the situation is far from ideal, as a full-time worker can only afford 720 rental properties throughout all of Australia.
The Recent Rent Increases and Housing Shortage Situation
The increase in rental costs has consistently been a hot topic within the Chinese-Australian community. According to CoreLogic's (2023) Monthly Housing Chart Pack for August of this year, rental prices in Australia continued to rise, with a 0.5% increase in August, bringing the national annual rental growth rate to 9.0%.
Chart 1: Annual Rental Change in Australia in August 2023
Source: CoreLogic
The annual growth rate of rental values in Australia continues to outpace the average level of the past decade, exerting a significant influence on international students, working professionals, and landlords.
In July 2023, the Institute of Public Affairs (IPA) released a report titled "Australia's Housing Shortage", which investigates how international students affect the Australian property market. The research showed that in the 2022-23 fiscal year, the net international student enrollment in Australia has achieved an all-time peak, with a total of 253,940 students (Begg & Kevin, 2023).
Chart 2: Net International Student Enrollment
Source: Australian Bureau of Statistics (ABS), IPA
The significant increase in international student enrollments has placed immense pressure on the housing market, surpassing the supply recovery pressure caused by reduced student enrollments during the pandemic. International students typically have limited budgets, and skyrocketing rents may exacerbate their financial burdens. In May of this year, ABC News reported the story of an international student who arrived in Australia only to find that the rent for a one-bedroom apartment had risen from an average of $400 per week to $650 per week. This example reflects the reality that international students will have to confront housing and financial pressures (Annika & Kelly, 2023).
For those who are working, they not only have to deal with the challenges of rising inflation in their day-to-day costs, but also need to spend more of their salary on rent, which may lower their consumption level and affect their quality of life.
On the other hand, for landlords, the increase in property values, strong rental growth, and lower vacancy rates can be beneficial to them because they could profit from the rise in rental. However, they may also face increased financial pressure due to rising interest rates and higher inflation, leading to higher mortgage payments and greater expenses associated with property maintenance and management.
More concerning is that some Chinese couples, due to limited budgets when getting married, purchased homes in relatively remote suburban areas. However, after marriage, they may need to rent out their original homes and seek rental properties in areas with convenient commutes or near good school districts. Recently, rising rents and housing shortages have mainly concentrated in central business districts and near school districts, making it difficult to rent out properties in remote areas. Some individuals, burdened by high-interest loans and steep rental costs, struggle to find tenants for their properties, leading to extended vacancies of up to six months and causing substantial financial losses.
Based on data from SQM Research (2023), as of August, the vacancy rate for rental properties in Australia stands at a mere 1.2%, and the quantity of available rental properties has plummeted to unprecedented levels.
Chart 3: Australian Residential Vacancy Rate
Source: SQM Research
The housing issue is a long-term crisis in Australia, with an increasing number of families experiencing rental pressure. The Housing Australia Future Fund (HAFF) will construct additional housing units for those in need, helping alleviate the pressure on the housing market.
The Legislative Process of the Bill
The HAFF bill was first introduced in the House of Representatives on the 9th of February 2023 and received its first reading. Subsequently, it passed the second reading and detailed debate on the 15th of the same month. It received its third reading on the same day (Parliament of Australia, 2023). The bill then moved to the Senate, where it was first introduced and read on the 6th of March. After several second reading debates, it passed the second reading motion on the 13th of September, along with a government-agreed amendment and 20 government-agreed requests during the committee of the whole debate. Finally, on the same day, the bill passed in the Senate and returned to the House of Representatives. The House considered the messages from the Senate, including the acceptance of the Senate's amendments. Ultimately, the bill passed in both the House of Representatives and the Senate on the 14th of September 2023.
Chart 4: Progress of the Australian Housing Future Fund Bill
Source: Parliament of Australia
Passage of the HAFF bill: Emphasis and Impact
In May 2023, The Australia Institute conducted a survey of 1,002 Australians nationwide to understand their attitudes towards the federal government's response to the housing crisis. The survey revealed that the majority of Australians are dissatisfied with the federal government's performance in addressing the housing crisis. Approximately 68% of respondents believe that the government has not taken sufficient measures to address the housing crisis, including 65% of Labor party voters and 83% of One Nation party voters. Over 80% of Australians support increased government expenditure for directly building affordable housing in the next federal budget. Meanwhile, when asked if the government's proposed investment fund can provide sufficient socially and economically accessible housing, 51% of respondents disagreed, compared to only 25% who agreed. The survey indicates that a majority of Australians doubt the government's handling of the housing crisis and believe that increased direct investment is necessary to address housing issues. This also reflects the importance of housing issues in Australian society and the strong desire of the public for the government to take more proactive measures to improve housing conditions.
The main goal of the HAFF bill is to address Australian housing crisis. The bill aims to tackle the tight housing market by constructing more affordable and social housing and providing support for those affected by family and domestic violence. The government views this bill as a significant housing reform that will have a profound impact on the current and future residents of Australia, providing more housing choices, alleviating rental pressures, and improving housing market affordability. The passage of this bill is seen as an important policy measure by the government to address the housing challenges facing the nation.
Key provisions of the HAFF bill include:
Allocate $200 million for the maintenance of housing in remote Indigenous settlements, with the aim of ensuring the quality and livability of homes within Indigenous communities.
Allocation of $100 million to provide temporary accommodation to support women and children affected by family and domestic violence. This is a crucial measure aimed at providing emergency assistance and shelter.
$30 million to aid veterans who are experiencing homelessness, offering support to individuals with a history of serving their nation. The aim is to aid their transition back into society and help them attain stable housing.
Constructing 30,000 units of social and affordable housing, with a particular emphasis on allocating 4,000 units to families affected by domestic violence or elderly women, to alleviate the urgent housing shortage.
In a specific year, losses from fund investments could potentially lead to a lack of profits to allocate. To prevent this scenario, the government has pledged to allocate $500 million annually for housing expenses, beginning in 2024.
The HAFF bill is good news for non-profit housing providers and the community housing industry. This bill provides these organizations with more opportunities and resources to meet the demand for affordable housing among the Australian people. Its passage represents a positive step forward.
Senior Economist Paul Ryan from PropTrack sees this deal as a positive step towards addressing the issue of affordable housing. He believes that it opens the door for further reforms such as zoning and tax reforms that can unlock existing housing resources. This development also indicates that housing will remain a crucial issue in the coming years, raising hopes for continued government action in this space. (Mercer, 2023).
Green Party leader Adam Bandt stated, " The housing system is cooked in this country. We've got people who can't afford not only to buy a home but even to rent near where they work or where their families are or where they're studying, and we've got a government that's just offering half measures and that will see the problem get worse and we are pushing for government to accept that we're facing big crises. I think the government is still in small target mode, but small target government will not fix the big problems Australia is facing. They weren't even talking about renters before the election and in the nine months that we've debated this bill, we've put renters squarely on the national agenda. Yes, we've secured some money for housing now, which was one of our two key things that we were pushing for, and now we'll turn to renters and look, they told us that money wasn't available and then they found some and now Labor is now backing unlimited rent rises but I don't think that's tenable and I think as we go to the next election with a third of the country renting, Labor premiers and prime ministers saying to everyone the landlord can jack up the rent as much as you like is not tenable solution because if they keep up with that then this housing crisis is going to turn into a humanitarian crisis.” (BANDT, 2023).
Under the original HAFF bill, the government set an annual cap of $500 million on disbursements from the fund to finance new homes. The Greens and other crossbench senators convinced the government to convert this ceiling into a floor — $500 million is now the minimum spend from the HAFF each year, rather than the maximum.
Independent Senator David Pocock was also instrumental in getting these annual payouts indexed, which means their real value will be maintained over time rather than eroded by inflation.
The breakthrough on the HAFF is welcome news to not-for-profit housing providers. According to Wendy Hayhurst, chief executive of the Community Housing Industry Association, it will give the sector confidence to plan and deliver new homes. Despite its designation as a “future fund,” though, the HAFF only offers five years of certainty. After that, there is no guarantee that more public funds will be available. This isn’t the impression the government wants to give. In its issues paper promoting discussion of a new National Housing and Homelessness Plan it says the HAFF will “build 30,000 new social and affordable houses in its first five years”. Together with the name, this gives the impression that another 30,000 houses could be built in each of the subsequent five-year periods. (Mares, 2023).
Conclusion
The passage of the Housing Australia Future Fund (HAFF) represents a historic housing reform. It is aimed at addressing the housing crisis by constructing affordable and social housing, providing more housing options, easing rental pressures, and improving market affordability.
While this is a positive step, the specific implementation and timeline will require further planning and action from various levels of government. The Chinese-Australian community and landlords will feel the significant impact of this bill and should carefully manage rents and housing choices to adapt to market changes. For investors, despite recent growth in the real estate market, there remains uncertainty in the outlook, influenced by various factors such as Reserve Bank of Australia policies, borrower debt capacity, overall economic performance, and unemployment rates. We should pay attention to investment plans, whether in real estate or other areas. Tenants and landlords should closely monitor changes in the rental market and manage rents and housing choices prudently to ensure their interests are protected.
We hope that this bill will substantially improve Australia's housing issues and serve as a new starting point.
Reference List
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Available at: https://www.abc.net.au/news/2023-05-19/international-students-migrant-housing-crisis-living-costs/102355508. (Accessed 15 September 2023).
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Mercer, L., 2023. The Housing Australia Future Fund: A $10 Billion Investment to Address the Housing Crisis. [online]
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The ownership of original articles, including copyrights and associated rights, is retained by this platform.
Unauthorised reproduction is strictly prohibited.