7
Jul
2020

How to reduce homelessness

by Brendan Coates and Jonathan Nolan


A growing number of Australians are homeless. Homelessness arises from a combination of personal, economic, and social factors. But poverty, scarce and costly housing, and reduced access to social housing all play a part. Many more experience financial stress and hardship because housing is unaffordable. And rising housing costs for low-income earners mean income inequality has been increasing.

There is a powerful case for more Commonwealth Government support to reduce homelessness and help house vulnerable Australians.
But housing subsidies are expensive and not all policies are equally effective.

In this submission to the parliamentary inquiry into homelessness in Australia, Grattan’s Brendan Coates, Jonathan Nolan, and Tony Chen urge the Government to give priority to reforms that target those most in need, and deliver the biggest bang for taxpayers’ buck.

It should construct new social housing for people at serious risk of homelessness, replicating the success of ‘housing first’ programs abroad. Social housing is particularly effective stimulus, but does come at a cost. Once more units are constructed, they should be reserved for those most in need, and at significant risk of becoming homeless for the long term.

The Government should steer clear of schemes to build more affordable housing. The most recent major affordable housing initiative, the National Rental Affordability Scheme (NRAS), was deeply flawed. It was expensive, poorly-targeted, and it didn’t materially increase housing supply. Future affordable housing schemes are likely to suffer from similar problems. Such schemes aren’t well targeted at people at high risk of homelessness. Inevitably, more people will be eligible than there are places available, making such schemes a lottery that provide more assistance to some than others – and often not the most needy.

Boosting Commonwealth Rent Assistance by 40 per cent would be a fairer and more cost-effective way to help the much larger number of lower-income earners struggling with housing costs. Rents wouldn’t increase much, because only some of the extra income would be spent on housing, but it would substantially reduce financial stress and poverty among poorer renters.

The Government should reform tax policies that inflate the demand for housing. Reducing the capital gains tax discount to 25 per cent; abolishing negative gearing; and including the home in the pension assets test would make housing cheaper, and also fund much-needed housing supports for vulnerable Australians.

Housing will become substantially more affordable for most low-income Australians only if we build more of it. The Commonwealth Government should provide incentives to the stats to fix planning rules that prevent more homes being built in inner and middle-ring suburbs of the capital cities. More private housing can and does help those on low incomes by lowering the rents they pay. And lower rents reduce the risk of homelessness for those already vulnerable.

Housing vulnerable Australians poses substantial policy challenges. Past governments have refused to face up to the size of the problem because they feared doing so would fuel demands for massive new expenditures on housing. But the challenge is not insurmountable. Policy can make a difference, but only if we make the right choices.

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