Homes NSW: From “Worst Landlord to Best”?

NSW Housing Minister Rose Jackson has set an ambitious goal for the newly launched Homes for NSW 10 Year Strategy - to take the agency from “the worst landlord to the best.” It’s a bold statement, and there are plenty of long-standing issues that will need to be addressed for that vision to be realised. The Strategy’s overall aim is simple but vital, that everyone should have access to a decent home and get the support they need.

We shouldn’t too quickly accept that Homes NSW is the worst landlord. As a public housing provider they charge rents that take into account the household circumstances, they make much more of their decision-making publicly and accountably and ultimately they are accountable to the community - there are no other homes in the state where you can, even in theory, vote out the management. But it’s certainly true that there are deep-seated issues and frustrations to address.

When the Tenants’ Union made its submission during the development of the Strategy, we drew on the experiences of renters and recognised that many people living in public and community housing are deeply skeptical about yet another plan promising change. Over the years, they’ve seen multiple rebrands and ten year strategies come and go, often bringing more bureaucracy, less accountability, and little improvement in their daily lives. It’s no wonder tenants are cautious. Rebuilding trust will depend on being clear about what’s being promised in this Strategy and then following through.

In response to the strategy release, Tenants’ Union CEO Leo Patterson Ross said “tenants know best their homes, their communities, their strengths and their challenges. Listening to and acting on their experience and expertise needs to be the foundation for transforming the public housing system in NSW.“ The Strategy mentions Tenant Participation Programs and tenant-led initiatives in local communities, but as a high level document it’s short on details, especially now that these programs are being run in-house. We would have liked to see in the Strategy a particular commitment to independent, sector-wide tenant participation panels. These would give both public and community housing tenants a way to share information, discuss issues, and contribute meaningfully to how the system is reviewed and improved. For tenant participation to be real, people need access to independent information and genuine space to discuss and evaluate what’s happening.

The Strategy sets out the actions Homes NSW will take to achieve the vision under three key priorities: customer-driven service, more and better homes, and a system that works. The Strategy outlines that Homes NSW will provide a service which will place people’s individual needs at the centre of their work. We strongly support a shift to person-centred services and this is an exciting and welcome shift. Using the phrase “driven” rather than centred needs to indicate an active relationship with greater decision-making and leadership from the people who use Homes NSW facilitated services. There will be a lot of work required to get engagement from people on this priority as many renters have had previously poor experiences when interacting with the social housing sector. Many of the processes built into the system appear, and many in reality are intended to be process or provider-centred. Many of the processes of the social housing sector have been so far removed from a person-driven approach that it may be hard for some people to believe this priority can be a reality but we are hopeful of seeing this shift. 

Homes NSW should not seek to present solutions and ask for feedback,  as has been the case in the past but instead create a dialogue about problems - both identified by Homes NSW and identified by people engaging with Homes NSW and explore solutions together.

The Strategy is a bit light on outlining what customer-driven service will look like in policy, tenancy management practices and engagement with tenants and it should drive changes in all of these areas. In particular, we think some key elements of a customer-driven service should mean:

1. that renting is affordable for tenants, 
2. homes are maintained in good condition and requests for repairs are responded to promptly and 
3. an increase in the number of homes being built. 

A case study for affordable renting 

We know that many social housing tenants find it challenging to afford essential living expenses after paying their rent. At times, they must make difficult choices, like skipping meals, forgoing medication or medical appointments, or missing out on basic necessities because they don't have enough money left after covering rent.  They want their rent to be genuinely affordable and we know that for many social housing tenants their rent is not genuinely affordable. If tenants in order to pay their rent are sacrificing other essentials like food, healthcare, heating and cooling their home then the rent is not affordable.  Looking at what is genuinely affordable in a customer-driven service should start with discussions with tenants on what they consider would be a fair rent. 

The current common measure of housing affordability used is the 30/40 rule, which defines ‘housing stress’ or unaffordability when a household in the bottom two quintiles of income distribution pays more than 30% of their income in housing costs. While the 30/40 rule is relatively simple to understand, it is nonetheless inadequate in capturing the problem of affordability for some households, particularly for those on low and very low-incomes. As an example of its inadequacy, while tenants of social housing would not be considered in housing stress according to the 30/40 rule because none pay more than 30% of their income on rent, more than two thirds are unable to meet basic living standards after housing costs and are living in poverty.

In our submission to the Homes for NSW Strategy we recommended a better model to adopt would be the residual affordability method for assessing affordability. Residual income methods calculate for different households how much is left over for housing costs after relevant expenditure as measured by a budget standard is considered. Where a household does not have enough money left over to cover their basic expenses after paying for housing, the household is considered to have an affordability problem. This model is outlined by Stone, Burke and Ralston in their 2011 AHURI research on The Residual Income Approach to Housing Affordability. 

Inevitably when there are discussions around reducing the rent paid by social housing tenants there will be questions around where will the money come from to plug the gap. We can look at the recent reduction in rent for some social housing tenants during COVID-19 when the NSW government ensured that the Coronavirus Supplement was not classified as assessable income under either the public housing or community housing rent policies. This meant that households in receipt of the Supplement had an effective rent of as low as 12.5% of household income, or as Pawson et al. put it, the Supplement was an effective 130% boost to income. The result was a marked decrease in rent arrears and a generally higher capacity to meet the needs of the household, without a reduction in the housing provider’s income which was reported at generally less than 3% despite the financial shocks of COVID-19.

Opening up income eligibility limits for social housing tenants could result in a small increase in rents collected. The end of the fixed term tenancy policy which we discuss later on will also allow people to remain in their homes even if their income increases and they are no longer eligible for a rent subsidy. This again will mean an increase in rental income collected by social housing providers.

Dr Laurence Troy from City Futures Research Centre undertook some modelling on the need and costs of social and affordable housing delivery.  They found in their modelling the rental income collected by social housing providers covers the operation running costs. Its really only when social housing providers are look to carry out development and need finance or upfront cash to cover the costs that a gap emerges between rental income and operating costs. 

All social housing should be set at a level which does not further impoverish the people it is attempting to support. Merely being comparatively less harsh than the private sector is not sufficient to meet the priority of customer-driven service. 

One of the big changes in policy that is already being implemented is the end of fixed term tenancy agreements for Homes NSW tenants. Prior to 2005 tenancy agreements for all social housing tenants were periodic and often termed and thought of as housing for life. In July 2005 there was a shift in policy with the introduction of fixed term tenancies and the length of the tenure offered was dependent on the circumstances of the individual tenant. However, the key change was that at the end of the fixed term there would be a review of the tenants' circumstances and if they were no longer eligible for social housing their agreements would be ended and steps taken to evict the tenant. Advocates have been calling for an end to fixed term tenancies since they were introduced two decades ago. Many studies have shown that the security of tenure that would be achieved through provision of continuous tenure is the most important factor contributing to long term positive outcomes for social housing tenants.

Notably, community housing providers didn’t follow the change in public housing and maintained periodic agreements. However, we have seen some attempts to implement the same kind of eligibility tests regardless. This means the details of the new policy will matter deeply but on the surface this appears to show Homes NSW returning to pre 2005 lease arrangements - a really great step.  We understand any tenant who was appealing a decision to end their fixed term due to ineligibility has been notified that the policy has changed and their tenancy will continue. Changing this policy is long overdue and is essential to deliver on the Strategy's aim that everyone has access to a decent home. This change indicates a willingness to roll back decisions made and continued over decades that don’t align with a well run public housing system. 

One of the Strategy's actions for ensuring everyone's right to a decent home is to review policies to ensure that eviction is a last resort. In NSW, social housing providers apply to the Tribunal to evict at a significantly higher rate compared to private landlords. Public housing tenants are taken to the Tribunal for termination matters twice as often as those in private rentals, while community housing tenants face eviction proceedings nearly 5 times more frequently. Around 80% of eviction applications by community housing providers are for non-payment of rent. We understand that many of these eviction applications are not intending to end a tenants tenancy but instead are used to engage in negotiations with tenants and make payment plans. Initiating eviction proceedings, seen as a way to formalise and ‘rubber stamp’ payment plan agreements by providers, is often experienced by the renter as a genuine threat to their housing. It can lead to anxiety, making some tenants unable or unwilling to engage with the Tribunal or address the application. These policies and tenancy management practices need to be urgently reviewed in light of the Strategy's vision and aims. We would like to have seen the Strategy go further to no eviction into homelessness. 

Improved data collection across all service providers and a shared systemwide measurement framework is a positive step in the Strategy. Our hope is that there will be greater transparency around this data and how providers are performing against the indicators.  More data about social housing properties and tenancy management practice made publicly available will allow for the independent monitoring of performance, and greater public transparency and accountability.

However, one major concern remains: funding. While the Strategy outlines important reforms and commitments, no additional funding has yet been allocated to fund the service and system reforms. Without proper investment, even the best ideas will struggle to deliver real change. For the NSW Government to achieve its goal of becoming the state’s best landlord, it needs to commit the necessary resources. Without that, the Strategy risks becoming yet another well-intentioned plan that doesn’t live up to its promise.

Footnotes

1. The 30/40 rule sets out that a household is in housing stress when it is in the bottom 40% of Australia's income distribution and is paying more than 30% of its income on housing costs. The estimation of 2/3 of social housing renters not being able to afford basic necessities is based on an assessment of housing affordability using the residual income. See Burke, T., Stone, M. and Ralston, L.(2011) The residual income method: a new lens on housing affordability and market behaviour, AHURI Final Report No. 176, https://www.ahuri.edu.au/research/final-reports/176, accessed 13 December 2024

2. For Australian households, the indicative budget standards generally referenced are those developed by the Social Policy Research Centre at the University of New South Wales. Peter Saunders, Megan Bedford (2017) New Minimum Income for Healthy Living Budget Standards for Low Paid and Unemployed Australians, Social Policy Research Centre, UNSW 2017

3. Pawson, H., Martin, C., Sisson, A., Thompson, S., Fitzpatrick, S. and Marsh, A. (2021) 'COVID-19: Rental housing and homelessness impacts – an initial analysis'; ACOSS/UNSW Poverty and Inequality Partnership Report No. 7, Sydney

4. NHFIC (2020) Australia’s affordable and social housing sector: A resilient response to COVID-19 https://www.nhfic.gov.au/media/1414/australias-socialand-affordable-housing-sector-28-october-2020.pdf

5. Troy, Dr L,  van den Nouwelant, Dr R and Randolph, Prof B. (2019) Estimating need and costs of social and affordable housing delivery, City Futures Research Centre, https://cityfutures.ada.unsw.edu.au/documents/522/Modelling_costs_of_housing_provision_FINAL.pdf