What does the Federal Government spend on housing every year? Who gets that funding? And what are the objectives of this expenditure?
Given the critical importance of secure housing to people’s wellbeing, and the escalating housing affordability crisis across Australia, these seem like reasonable questions.
Every year billions of dollars are dispensed through the Federal Budget on direct support to households and housing service providers, including Commonwealth Rent Assistance (CRA), social (public and community) housing construction and maintenance, homelessness services, help-to-buy schemes such as first home buyers’ grants and shared equity programs, Indigenous housing services and defence housing.
On the tax side of the Federal Budget, billions of dollars in revenue are forgone by the provision of tax concessions to property owners. The Tax Expenditures and Insights Statements published by the Department of Treasury and Finance detail various property tax concessions, but the costs and benefits are not evaluated in relation to direct government expenditure on housing programs nationally.
Actually, there is no federal housing policy that properly details all government expenditure on housing, or that seeks to evaluate the impact of tax concessions on the housing market. The federal housing ministry is located within the Department of Social Security and, as such, is part of the welfare function of government – the “transfer” side of the budget ledger. Tax concessions for property purchase are a function of Treasury and operate on the “tax” side of that ledger.
The lack of a Department of Housing, or of a consolidated housing policy and portfolio budget statement, means that there is no way for the public, or even for policy makers, to understand whether our tax and transfer system is operating effectively in the housing system.
This paper attempts to build a coherent picture of Australia’s real federal housing budget, and to determine how government intervention in the housing market affects housing affordability and security. It looks at the history of government housing programs and asks whether the tens of billions of dollars the public gives to support the housing needs and choices of Australians is money well spent in the pursuit of a fairer, more inclusive and more sustainable society.
The paper is composed of three parts:
- Firstly, it provides an account of actual Federal Government expenditure on housing, and posits that the current method for accounting for housing expenditure is opaque and inconsistent;
- Secondly, it draws together historical data on spending from different federal housing-related programs in order to highlight how federal housing expenditure has changed over time; and
- Thirdly, assesses how these changes have altered the distribution of the federal housing spending between different income quintiles, providing a lens through which to consider whether the public money injected into the housing market is creating a more or less unequal country.
- The housing sub-function of the Federal Budget was $3.5 billion in 2021/22, but this did not include key housing support measures such as Commonwealth Rent Assistance and property tax concessions. With these included, actual 2021-2022 federal expenditure on housing is estimated at $27 billion.
- The share of federal housing spending going to the lowest 20% of income earners declined from 44% in 1993 to 23% in 2023, while the share going to the top 20% increased from 9% to 43%.
- In the last decade alone, the share going to the top 20% of earners has increased by over a third.
- The share of total federal housing expenditure going to property investors rose from 16.5% in 1993-94 to 61.4% in 2021-22.
- Investor tax concessions have grown from $1.5 billion in 2000 to an estimated $18 billion in 2024, effectively operating as a shadow housing policy with a significant impact on the market.
- In 2023-2024, federal investor tax breaks will be worth more than ten times the amount spent by the Federal Government on social housing and homelessness services through the National Housing and Homelessness Agreement.
- Strategic expenditure on social housing and homelessness services, which are negotiated between the Federal and State/Territory Governments, once made up well over half of total federal housing spending. Now just 7% of total federal housing expenditure goes toward these programs.
Given the escalating crisis of housing affordability and security, and the fact that three-quarters of young people now believe they will never own a home, it is imperative that policy makers understand these inequities and account for them to the Australian people.