As more Australians are renting privately, more are living in poverty.

Social housing – in which rents are usually capped at 25% of tenant incomes – used to be a big help to Australians in need.

Infrastructure Victoria has discovered that social housing helps the homeless. Only 7% of renters residing in social housing are rendered homeless in time, in comparison to 20% of private renters.

But the stock of available social housing options – presently consisting of about 430,000 dwellings – has barely expanded in two decades, during an era in which the nation’s Australia’s population has grown 33%.

As the majority of social housing tenants remain in that housing for more than five years, the stagnant stock of this type of housing means that there is little housing available for those who suffer a reversal of fortune.

Social housing is costly. The capital cost per unit beyond the money recouped in rent equals $300,000.

A new Grattan Institute paper published on Monday proposes a $20 billion federal government Social Housing Future Fund, which would assign regular capital grants to state governments and community housing suppliers.

Future funds are not without precedent. The Future Fund Board of Guardians, chaired by onetime Commonwealth Treasurer Peter Costello manages $247.8 billion in assets within six funds to address issues ranging from federal public servants’ superannuation entitlements to drought to disability care to medical research.

The endowment for the Social Housing Future Fund could be set up by borrowing at modern low interest rates. Certain states, such as Victoria, NSW, and Queensland manage social housing investment funds, some financed by privatisations, others financed by government borrowing.

The money would be managed by the standing Future Fund Board of Guardians with the returns over and above inflation applied to supply capital grants for housing, keeping up the true value of the fund through time.

Capital grants for new social housing units would be assigned by the standing National Housing Finance and Investment Corporation through competitive tenders after identifying home size, locale and subsidies for residents.

As is the instance with the standing Future Fund, the funding would be afforded apart from the budget, with only every year’s profits or losses influencing the budget balance.

The additional $20 billion in gross government debt would be minute in comparison to the nearly $1 trillion presently on issue, supported by approximately $500 billion a year in federal government revenues.

A $20 billion fund that attained post-inflation returns of 4-5%, could through time supply $900 million each year – sufficient to guarantee 3,000 additional social housing units annually in perpetuity, acting under the assumption of $300,000 per residence.

Beginning in 2022-23, the fund could construct 24,000 social housing dwellings by 2030, and 54,000 by 2040. The governments of tomorrow would be free to top the fund, aiding in the expansion of the social housing share of the national housing stock.


Assuming $300,000 capital grant per dwelling, indexed to inflation. Source: Grattan analysis


The Labor Party has suggested a similar plan, in which money is applied for yearly service payments to community housing suppliers as opposed as through upfront capital grants.

The on-budget cost of the proposal would be basic: about $400 million a year, or less than 0.1% of federal government spending in the shape of interest expenses.

A portion of the above-inflation return from the fund annually could be utilised to cover these expenses, allowing $500 million to fund the building of nearly 1,700 new social housing units annually with no expense to the budget.

The Commonwealth should call upon state governments to match the contribution.

Any state that does not agree to supply matching contributions would be not be eligible for capital grants for social housing in that particular year, with the savings reinvested in the Future Fund and distributed in all states the next year.

If matched state funding was coming, the fund could guarantee 6,000 social homes annually – sufficient to halt social housing shrinking as a share of the total housing stock.

This would multiply the build to 48,000 new houses by 2030, and 108,000 by 2040, elevating the present stock by one quarter.


Assuming $300,000 capital grant per dwelling, indexed to inflation. Source: Grattan analysis


Still needed would be a boost of rental assistance for individuals on income support and boost housing supply to reduce rents.

But it would grant a required helping hand to our most vulnerable, and maintain social housing for future generations.



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