Australia’s long-term agreement to address housing affordability and homelessness is ineffective, a report has found.

Releasing its study into the National Housing and Homeless Agreement (NHHA) last week, the Productivity Commission said the agreement is not working and should be changed when the current agreement expires in 2024.

“The NHHA is intended to improve access to affordable housing, but it is ineffective,” Commissioner Malcolm Roberts said.

“It does not foster collaboration between governments or hold governments to account. It is a funding contract, not a blueprint for reform.”

Having commenced on 1 July 2018, the NHHA is an agreement between the Commonwealth and state/territory governments which aims to address challenges relating to homelessness and housing affordability across Australia.

It sets out the roles and responsibilities of the Commonwealth, State and Territory Governments in improving housing outcomes and identifies nationally agreed objectives, outcomes and performance indicators.

As part of the agreement, the Commonwealth provides around $1.6 billion to states/territories each year to improve access to secure and affordable housing.

To receive funding, states are required to have publicly available housing and homelessness strategies.

The current agreement is set to expire in 2024.

In its review, the Commission found that the agreement was based on a sound objective.

In particular, a strength of the agreement was the breadth of the objectives to improve housing outcomes across the spectrum covering the full suite of tenures from housing to home ownership. Inclusion of such a broad spectrum in the objectives recognises that different segments of the housing spectrum are interconnected, the Commission said.

However, it found that the agreement has several shortcomings.

These include that:

• Despite the broad nature of its objectives, the actual agreement itself is too narrow in scope.
• The NHHA is simply a funding agreement and is not an agreement for coordinated policy action.
• The framework for performance assessment is inadequate.
• The agreement does not commit governments to implementing reform.
• Funding under the agreement is inadequate and is not suitably connected to the agreement’s broad objectives.

Speaking on the first point, the Commission says that the actual agreement focuses too narrowly on housing and homelessness services and fails to include important housing levers such as Commonwealth Rent Assistance and support for home buyers.

This limit’s the agreement’s usefulness in delivering upon its broadly defined objectives.

Next, the Commission argues that the actual NHHA is really more of a funding agreement for housing and homelessness services and is not an agreement for coordinated policy action.

The NHHA does not foster intergovernmental collaboration and does not set out a national reform agenda to address structural housing affordability challenges.

This, the Commission says, is a major shortcoming.

In a complex system such as the housing market, policies and actions which impact some segments of the markets ripple through to other market segments. Coordinatiion helps to ensure that different policies work together in a coherent manner rather than pulling against each other.

Whilst the agreement does hold states accountable to the Commonwealth in terms of funding allocation, meanwhile, it does not foster whole-of-government responsibility and accountability to the broader Australian community for achieving housing outcomes.

Third, the Commission says that the performance assessment framework under the agreement is inadequate.

The agreement does require the Commonwealth to publish an independent annual report on national performance indicators and requires state and territory government to report annually on their expenditure through statements of assurance.

However, a dashboard which was developed by the Productivity Commission to report on national reporting indicators reports on only four of the fourteen indicators which are specified in the agreement.

Even for some of these indicators, data is either collected infrequently or is not available at all.

Meanwhile, some indicators are of limited value. For example, the performance indicator for zoning reform is not increased housing supply (the goal of reform) but the far less useful measure of the change in the number of potential dwellings permitted by zoning, the Commission says.

Finally, there is no agency or body which is responsible for ensuring that performance reporting is meeting the intent of the performance framework. Therefore, there is little by the way of meaningful discourse on the effectiveness or otherwise of current government actions in meeting the agreement’s objectives.

Fourth, the Commission argues that the NHAA does not commit governments to implementing important reforms.

Whilst the agreement forces states and territories to have a publicly available housing and homelessness strategy addressing the NHHA’s national priority policy areas and priority cohorts, the Commission argues that this requirement has not prompted state and territory leaders to engage in important reforms.

At a Commonwealth level, the agreement does not require the Australian Government to have a national strategy for housing and homelessness – albeit with the current Labor Government having committed to develop such a strategy.

This is important as a strategy led by the Australian Government has the potential to provide a clear vision and a strategic direction for housing in Australia, to account for a broad range of policy levers including some (such as taxation or immigration) which are outside the scope of the NHHA and to bring together all parties including the non-government sector and those with lived experience of housing challenges.

Finally, the Commission noted that demands associated with NHHA funding are growing as other sources of funding for housing and homelessness programs have ceased and demand for housing and homelessness services has grown.

The report comes as challenges associated with housing affordability continue to grow.

At the extreme end, as many as 278,300 people received assistance from specialist homelessness services in 2020/21 – a number which has increased each year since 2011/12.

In that year, as many as 114,000 households were turned away as the provider did not have the capacity to assist them. This equates to 312 households being turned away each day.

Meanwhile, in 2021, around 176,000 people were languishing on social housing waiting lists.

All this is being driven by deteriorating housing and rental affordability.

At the owner-occupier level, rising house prices have meant that home ownership has ceased to be realistic for many young Australians.

Those who do buy a home are needing to take out bigger mortgages with higher repayments.

In the rental market, as many as two-thirds of households who rent and who are in the bottom two income quintiles spent more than 30 percent of their income on rental payments in 2019/20 (households who spend beyond this portion of their income on either their mortgages or rent are considered to be in a state of mortgage rental stress).

In its report, the Commission made 37 recommendations to guide future NHHA agreements.

These include:

• Brining all housing assistance under the next intergovernmental agreement (as things stand, the NHHA covers only 10 percent of government spending on housing assistance) to help governments prioritise spending to those in greatest need.
• Adoption of a two-track approach to ease pressure on low-income renters and remove constraints on new housing supply
• Review of the $5.3 billion Commonwealth Rent Assistance Program.
• Improvements to the safety net (homelessness and social housing) including greater investment in social housing, more support for homelessness prevention, early intervention and experimentation with more timely and flexible ways to assist those in need.
• Reforming the NHHA to adopt a greater focus on coordinated policy action across jurisdictions, homelessness prevention and early intervention, and Aboriginal and Torres Strait Islander housing.”

Building industry lobby groups welcomed the report and stressed the Commission’s points about new housing supply.

“Today’s report reaffirms that we will remain in a housing supply crisis until we improve our planning for new homes of all types,” Property Council of Australia CEO Ken Morrison said.

“We congratulate the Productivity Commission on this piece of work and welcome its recommendation for a major overhaul of housing policy within a framework agreed to by all levels of government.

“As the Productivity Commission states, ensuring housing supply is more responsive to demand will have a powerful impact on affordability and needs to be a key policy focus for governments.

“We wholeheartedly support the evolution of NHHA into a comprehensive framework for national housing supply delivery. It has been little more than a money funnel from Canberra to the states and territories without any consideration of productive housing supply for far too long.”

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