Inside Story

Tactics versus strategy in Indigenous housing

The federal government’s bargaining position will worsen the shortage of homes in remote communities

Michael Dillon 18 January 2018 2931 words

Vacating the field? Federal Indigenous affairs minister Nigel Scullion. Mick Tsikas/AAP Image

In an eleventh-hour pre-Christmas flurry, officials from the Department of the Prime Minister and Cabinet contacted their counterparts in Western Australia, South Australia and Queensland to initiate negotiations for the renewal of Commonwealth funding for remote housing services, which expires in June. Perhaps it was a mischievous negotiating tactic, but the officials appear to have told the states that only the Northern Territory would continue to receive funding. The existing arrangements were one-off, they said, and support for housing is essentially a state responsibility.

The states reacted predictably, immediately releasing statements critical of the cuts. The federal Indigenous affairs minister, Nigel Scullion, duly accused them (in a statement that doesn’t appear on his website) of “undermining good faith negotiations” and denied that Commonwealth funding was ceasing. But he also said that the states should spend some of their mainstream federal funding on social housing for remote residents, and confirmed that the negotiations had begun only on 20 December. Then, during a visit to Gunbalanya in the Northern Territory last week, he appears to have pledged to match the NT government’s longstanding commitment of $1.1 billion over ten years for remote housing. Once again, he told the three states to put up their own money.

No one doubts that housing plays an important role in alleviating deep-seated disadvantage, and few would dispute that remote Indigenous communities are the locus of perhaps the most concentrated disadvantage in the nation. So what is going on here? Why the last-minute resort to mixed messages?

The federal government has played a crucial role in funding social housing since the second world war. Following the 1967 referendum, it gradually ramped up its direct investment in Indigenous housing programs both through the Commonwealth–State Housing Agreement and with a number of Indigenous-specific programs. Until 2007, the CSHA included funds for Indigenous social housing delivered by the states and territories, while the Commonwealth itself ran a nationwide Indigenous housing and infrastructure program, the Community Housing and Infrastructure Program, or CHIP.

These programs recognised the reality that the states had not provided adequate social housing to their Indigenous citizens. While the overt racism of the states’ policies has largely disappeared, the invisibility of Indigenous interests continues. The case for an ongoing Commonwealth engagement in remote housing policy remains incontrovertible.

A 2007 report on CHIP, commissioned by John Howard’s Indigenous affairs minister, Mal Brough, found that the program had failed to focus on need. Given that Indigenous citizens in urban areas and regional centres had access to mainstream social housing options, the most urgent need was clearly in remote communities. There, the almost total lack of private rental housing in remote communities meant that residents couldn’t qualify for Commonwealth Rent Assistance, the largest social housing program in the nation.

In its last year in office, the Howard government increased funding for Indigenous housing and infrastructure. Then the Rudd government struck a National Partnership Agreement on Remote Indigenous Housing with the states, which came with a massively increased Commonwealth investment of $5.5 billion over ten years. Construction and tenancy management were to be undertaken by the states and the Northern Territory, with each jurisdiction given targets for dwelling numbers, refurbishments and Indigenous employment. Even so, it was recognised that the investment wouldn’t meet the totality of housing needs in remote Australia.

The ten-year agreement survived the arrival of the Abbott government in 2013, albeit with the almost-mandatory change of name (it is now known as the National Partnership on Remote Housing, or sometimes as the Remote Housing Strategy) and a funding cut of $95 million. But now, with less than six months to run, what is likely to replace this scheme?

In November 2016, to pave the way for the decisions that will answer that question, Nigel Scullion announced a review of remote Indigenous housing. “Overcrowding, homelessness and poor housing conditions in remote Australia remain unacceptably high,” he said. The review had two tasks: an analysis of what had been done and an assessment of what should happen.

The prime minister’s Indigenous Advisory Council was briefed on the review progress in May last year. In its 19 May communique, the council made a number of comments on Indigenous housing and the review-in-progress, among other things expressing concern that “despite significant reductions in overcrowding investment is required to meet unmet need and maintenance of housing stock.”

In August, Scullion foreshadowed a number of likely policy directions during an episode of ABC TV’s Q&A broadcast from the Garma Festival. “We’re deadly serious about this,” he said. “We’ve invested $5.4 billion over the last decade, and I think everybody would agree we could have done a lot better. We have reduced overcrowding from 52 per cent to 37 per cent — it’s still in the margins, and that took a fair while to do.” In talks with the states and territories about the National Partnership, he said, “we’ll be negotiating on the basis of what the communities have asked us to negotiate on.”

He went on: “So, Indigenous employment is non-negotiable. Indigenous procurement is non-negotiable. And we’ll be asking the states to match those funds. Because we need a pulse. Sometimes we can just trickle along and we’ll be just catching up, just getting ahead, but we actually need a significant injection of funds. So, that’ll be the basis of our negotiation with the states.”

Then, on 26 October, just before the most recent Senate Estimates hearings on Indigenous affairs, the minister released the Remote Housing Review’s report, which essentially confirmed the minister’s assessment of the unacceptable state of remote housing. Its headline finding was that:

By 2018, the Strategy will have delivered over 11,500 more liveable homes in remote Australia (around 4000 new houses and 7500 refurbishments).

This increase in supply is estimated to have led to a significant decrease in the proportion of overcrowded households in remote and very remote areas, falling from 52.1 per cent in 2008 to 41.3 per cent in 2014–15. The Panel projects this will fall further to 37.4 per cent by 2018.

The minister and his officials made no absolute commitments to remote housing at the Estimates hearing. But they did lay down what appeared to be the benchmarks that will shape future Commonwealth policy.

First, they argued — against accepted wisdom and contrary to the history of Commonwealth involvement since at least 1968 — that funding for remote Indigenous housing was primarily a responsibility of the states and territory, and that the Commonwealth’s role was in effect optional or discretionary. “Yes, we have seen this review and we’ve let the states know about the review,” said Scullion. “They are aware that this is a national partnership agreement under which we haven’t reached the goals we were supposed to reach, because then it was to go back to the states’ responsibility…” The Commonwealth would negotiate with the states about what percentage of the responsibility it retains, he went on. “It was the intention that by this stage, the Commonwealth would have no further role and the role would go back, rightly, to the states and territories in this regard.”

But there was never an “intention” that the National Partnership on Remote Housing would be the end of the Commonwealth’s involvement; indeed, it was recognised when the agreement was negotiated that its targets would meet only around half of the outstanding need for remote housing. Moreover, the National Partnership largely met its goals; in fact, allowing for substitution of investment between new builds and refurbishments, it exceeded its goals.

One way to interpret the minister’s statement is that a cabinet decision had not been made, but that he recognised it was unlikely to allocate a further $5.5 billion over ten years. He also appeared to rule out a new national agreement, indicating instead that the government was considering a series of bilateral agreements with the three states and the Northern Territory. No persuasive argument has been made for such a shift, but it will clearly allow what will effectively be a bidding war between the relevant jurisdictions (which all happen to have Labor governments) based on their preparedness to match Commonwealth funding.

This shift also opens up the possibility that the ten-year program will give way to shorter-term agreements. It also increases the likelihood of reductions in funding through the annual federal budget process, whereas the National Partnerships — endorsed by the Council of Australian Governments — appeared to have a greater (but not total) degree of protection from budget revisions.

The minister also backtracked on the timing of an announcement of the new funding arrangements. In responses to earlier Estimates questions, the government had advised that the decision would be announced as part of the Mid-Year Economic and Financial Outlook statement, or MYEFO, normally brought down in December or January. In the latest Estimates hearing, Scullion shifted ground, indicating that discussions with the states and territory were at a very preliminary stage and “it’s unlikely any announcement will be made prior to MYEFO, but there will certainly be an announcement prior to or during the budget process.”

One key recommendation of the Remote Housing Review was that “a minimum five-year rolling plan” should be created for the program. Yet the Commonwealth’s delays mean that the states and the Northern Territory will enter the 2018–19 financial year with very little time to develop a capital works program, more or less guaranteeing a hiatus of a year or more.

What should the next iteration of the National Partnership look like? The two first-order issues are the levels of need across remote Australia, as measured by overcrowding; and the investment needed to maintain the existing housing and increase its lifespan. The necessary level of funding flows from these two factors.

Other issues are important but secondary. They include maximising local Indigenous employment and/or Indigenous employment generally; deciding how best to deliver necessary repairs and maintenance; choosing and resourcing the most effective tenancy support models; and determining how to make trade-offs between design and cost, between new building and refurbishment, and between construction cost and whole-of-asset lifespan cost.

As a guide to meeting the first-order goals, the minister’s Remote Housing Review is of only limited assistance. In estimating the ten-year need for 5500 houses, it includes only households that need three bedrooms or more, and citizens who are homeless. As it concedes, “the overcrowding challenge is likely to be greater.” The review’s estimates are based on 2011 rather than 2016 census data, and it fails to include any estimate of how many houses are reaching the end of their effective lifespan, and when they will need replacing. (Such data is virtually non-existent, but if average asset lifespans were thirty years, and the national remote Indigenous community housing asset base were 15,000 houses, then we could expect around 500 houses to reach effective “end of life” each year, or 5000 over the next decade.)

The review’s modelling is based on reducing overcrowding from 37 per cent to “around 25–30 per cent by 2028,” a level still 10 percentage points higher than in urban and regional areas. It makes no assessment of outstanding need based on matching the rate in metropolitan Australia. (Given that the National Partnership’s extra 4000 houses reduced overcrowding by 15 per cent, and that the review estimates that 5500 extra houses would reduce overcrowding by another 10 per cent, then at least 5000 more houses would probably be required.)

The review reports but then entirely ignores the figures on current demand and projected need provided by three jurisdictions, which total 7520 houses. This suggests that a more accurate figure for the coming decade would be at least 10,000 new houses and arguably 15,000 new houses. Assuming a construction cost of $600,000 per house, delivering 10,000 houses would cost $6 billion. This would need to be complemented by a program of refurbishments aimed at extending asset lifespans wherever possible; assuming effective property and tenancy management policies are in place, this might involve somewhere in the region of 2000–5000 refurbishments over the next decade. Three thousand refurbishments at $100,000 each would add $300 million to the necessary outlays.

Finally, the review correctly emphasises the need for a complementary recurrent program designed to deliver property and tenancy management to the entire asset base. The review’s most insightful conclusion, based on detailed research by Nous Consulting, is that annual rental revenues cover only between 10 and 20 per cent of the actual cost of maintaining remote housing. (Much of this extra cost is a function of remoteness.) This suggests that some $2.8 billion in additional funds will be required to maintain the existing asset base over the next decade.

These rough though conservative calculations suggest that meeting the outstanding housing need in remote Australia over 2018–28 would cost around $9 billion: $6 billion for 10,000 additional houses, $0.3 billion for refurbishments, and $2.8 billion for property and tenancy management. While these figures are daunting in themselves, the challenge is magnified by the fact that they don’t include land servicing, essential services infrastructure, and access roads, all of which were selectively funded by the current National Partnership.

Underinvesting in remote housing over the coming decade will have devastating consequences. For taxpayers, the lifespans of housing built under the National Partnership will be substantially and prematurely shortened by inadequate maintenance. The costs of poor health, education and social outcomes will expand. The local economic activity that spins off capital works will dissipate, further undermining economic development in remote communities. Most importantly, though, the lives and opportunities of tens of thousands of remote citizens will be irretrievably constrained. Evidence from the latest census shows that income levels are worsening in remote Australia, and a pullback in remote housing investment will only exacerbate the trend.

Apart from renewing the National Partnership with a significant level of funding, what options exist for the Commonwealth and the states? I would suggest four.

First, the Commonwealth needs to make good on its commitment to open up opportunities for private-sector investment in remote community housing. One major impediment thus far has been the lack of progress in land reforms (which, to be effective, must not lessen the rights of traditional owners or native title holders). Another has been a lack of innovative vision within government. A third has been the transaction costs and other hidden disincentives that hold back investment, even where progress has been made on more flexible institutional frameworks (for example, the township leases in a number of NT communities). And the fourth is a lack of access to capital. The government’s focus on higher levels of home ownership among remote Indigenous citizens, the vast majority of whom are welfare recipients, has been misdirected; they would do better to concentrate on building up a rental housing market in remote Australia, where it is virtually non-existent.

One way to kickstart such a shift would be to establish a government-owned corporation (which might joint venture with Indigenous corporations) able to borrow in the private sector to build, own and rent out housing in remote communities. Such an initiative would tackle the shortage of housing, and of staff housing, in remote communities (which acts as a disincentive to attract and retain both locally engaged and external staff); would open up new sources of private-sector capital for investment in remote locations; and would begin to give remote Indigenous residents access to the Commonwealth Rent Assistance program.

Second, policy-makers could focus on supporting three or four community housing providers across remote Australia to complement the operations of state housing authorities in remote regions. Although the National Partnership established formal lines of accountability for the owners of social housing, state and territory housing authorities have yet to deliver on their responsibilities. Introducing competing providers may be necessary to demonstrate that poor housing is not an inevitable and endemic feature of remote regions.

Third, given the propensity of the states and the Northern Territory to underfund property and tenancy management in remote regions, the Commonwealth should take a much more direct role, either by delivering these services itself (perhaps by injecting Commonwealth officials into the relevant parts of state and territory housing authorities) or by establishing a new statutory office to monitor, oversee and regulate them. Such an initiative might need only exist for ten or fifteen years until new expectations are embedded into bureaucratic practice, but it would ensure that the capital investments to date, and any future investments, will be protected from accelerated wear and tear.

Finally, one innovative element of the National Partnership was the capacity to vary funding allocations in response to state governments’ performance against key metrics. Despite improvements in state and territory performance, this element was discontinued after the change of government. While the Remote Housing Review argues that varying funding had “undesirable and unintended consequences,” it is salutary to reflect on the fact that the best-performing state in terms of value for money, South Australia, was penalised for poor performance in the early years of the program.

Without a renewed commitment, we will witness a slow-motion national crisis. The asymmetry between the short-term benefits of reduced investment and the longer-term social, economic and health costs is leading to decisions that are not in the public interest, and certainly not in the nation’s long-term interest.

How this issue is resolved will be a test not only of the capacity of the Australian Public Service to drive good policy, but also of the calibre of our political leaders and, ultimately, our national character. The pre-Christmas flurry appears to have been designed to scare the states into thinking that the Commonwealth might allocate no funds at all, and thus pressure them into treating any offer as a bonus. It might work politically, but will magnify the task of closing the gap in remote Australia. ●