Introducing Competition and Informed User Choice into Human Services: Reforms to Human Services

The Productivity Commission has released its report Introducing Competition and Informed User Choice into Human services: Reforms to Human Services

The Productivity Commission undertook this inquiry to “examine policy options that apply the principles of informed user choice, competition and contestability to the provision of human services,” including social housing.

Recommendations are framed within the language of “how to apply increased competition, contestability and informed user choice to improve outcomes for users and the community as a whole”.

The report states that the social housing system is broken. It highlights that the current rental subsidy system is inequitable with tenants receiving different levels of rental subsidy linked to housing tenure, not individual circumstances or needs. In response, the report recommends attaching rental subsidy to tenants, increasing Commonwealth Rent Assistance (CRA) by 15 per cent, and extending it to social housing tenants with supplementary payments by Commonwealth and States and Territories where required. Also, the Commission recommends a shift from income-based to market-based rents. Whilst the Commission acknowledges the need to build more social and affordable housing, it posits that proposed reforms will provide an incentive to that end focussing on a demand rather than a supply strategy to address the shortage in housing supply.

Whilst there is some attraction to a single financing system, a key issue is the lack of financial modelling of the costing and level of “supplementary” assistance that would be required by States and Territories, or any detail of the variability required for different markets; along with the lack of commitment from the States and Territories in relation to a supplementary payment. 

In its submission to the Commission, National Shelter suggested the Commission undertake modelling to demonstrate how funding currently flows within the social housing system between the Commonwealth and State Governments, Community Housing Providers, private landlords, the non-government sector and tenants to maintain and sustain assets and support tenancies.

More sophisticated investigation is needed to test the efficacy and likely impacts of the recommendations from a whole of housing system perspective including a full cost disclosure, with alternative options evaluated and publicly reported, and the likely outcomes on consumers assessed.

The Commission’s recommendation to shift to market-based rents is of concern. Without the modelling to show the impact, even with their recommended increase in CRA, it is difficult to see how this will support greater consumer choice and better housing outcomes. The lack of supply makes this unlikely or very limited.

National Shelter supports the Commission’s recommendation of a single regulatory system across social housing. Shelter WA welcomes the Commission’s recommendations that would potentially lead to social housing system improvements – including the separation of asset management, tenancy management and tenancy support both in social housing and the private rental market.  The Commission calls for a stronger user focus, better service planning and improved coordination across services and levels of government.  Shelter WA supports this. Also, they propose the introduction of a choice-based letting system. Whilst this is attractive, further work is required on how this system would operate, where resources to back the technological requirements would be derived, and critically that sufficient supply has been added to the system to make real choice possible, and appropriate allocation and tenancy management addressed.

More consideration is needed on the supply side and this is the weakest area of the report, especially given that a consistent theme of submissions made to the inquiry was the need for more affordable housing supply. Whilst demand side responses are important, they will not work without attending to the well-evidenced shortage of affordable and suitable housing supply for low and very low-income households.

Shelter WA, like the Commission, agrees the social housing system is broken and is poorly structured to meet the challenges it faces.  Whilst the Commission’s focus on tenant choice is welcome, along with the need for increased rental subsidies, improved resource allocation and service improvements, it is difficult to see how these measures will increase affordable housing supply, and lead to greater consumer choice.  Choice and competition assumes a balance between supply and demand.

The Productivity Commission’s approach needs to be placed within a broader reform context.   This needs to include the inadequacy of current income support payments along with rental assistance, consideration of tax settings that distort housing markets, the role of urban planning in delivering affordable housing diversity and choice, tenancy reform and importantly, the need for greater investment in social and affordable housing supply.

AHURI research has outlined the critical need for supply side initiatives to grow private sector affordable housing growth. This includes subsidised rental schemes such as the National Rental Affordability Scheme (NRAS), combined with planning mechanisms to deliver land for affordable housing and measures to build the capacity of the community housing sector. This could deliver a significant supply of dwellings to add social and affordable options, and attract new private sector institutional finance to renew existing portfolios of public housing stock. 





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