Tuesday, 7 November 2017

The fundamentally flawed Remote Housing Review


The current National Partnership on Remote Housing (previously the National Partnership on Remote Indigenous Housing or NPARIH) was established in 2008 by COAG. NPARIH was allocated funding of $5.5bn over ten years from the Commonwealth while housing delivery was administered by the states and the Northern Territory.  The National Partnership expires in June 2018. The responsible Minister, Senator Scullion, has made a number of statements over the past few months concerning the Government’s likely approach to future funding for remote housing, but has yet to announce the shape of any new program nor the quantum the Government will allocate to address the continuing shortfalls in housing in remote communities.

To pave the way for the necessary Commonwealth Government decisions on these issues, on 18 November 2016, the Minister for Indigenous Affairs Senator Scullion announced ‘an independent review into remote Indigenous housing to explore practical and innovative solutions to address the inadequate conditions and supply in remote Indigenous housing’ (link here).

According to the Department of Prime Minister and Cabinet (PMC) website, the Review had two tasks: an analysis of what was implemented in the past and an assessment of what should be effected in the future’.

In his media release announcing the review, the Minister stated that ‘Overcrowding, homelessness and poor housing conditions in remote Australia remain unacceptably high’.

On 26 October 2017, the Minister released the Review Report (link here).

This post assesses the high level adequacy of the Review Report given that it will comprise an important input into the Governments policy formulation process in relation to future support for remote Indigenous housing. A subsequent post will analyse the Government’s statements so far, explore the likely shape of the next phase of remote Indigenous housing investment, and assess the implications for both taxpayers and remote Indigenous citizens.

On first reading, the Review report appears to have fulfilled the two aims listed on the PMC website. It includes a swathe of data, examines some innovative options, and reaches a number of important and sound conclusions, in particular in relation to the importance of an ongoing recurrent program to maintain the quality of the existing remote social housing asset base, and identifies the structural constraints in relation to revenue raising capacity which constrain remote the social housing system in comparison to the national social housing system overall.

Nevertheless, on closer analysis, I have reached the conclusion that the Review is fundamentally flawed in a number of its headline findings and recommendations. The Review neither gives an accurate account of what has transpired over the past decade in remote social housing sector, nor offers a cogent roadmap for the future.

I have identified eight high level issues which undermine the legitimacy and utility of the Review Report as an objective input into future policy formation.

First, the Minister appears to have exercised a high degree of influence over the Review process, its findings, and its recommendations. He does not appear to have issued formal detailed terms of reference, or if he did, they have not been published. The ‘independent’ Panel comprised three Indigenous members one of whom has organisational affiliations with substantial current funding from the Indigenous Advancement Strategy funding (which the Minister controls), and who was also a member of the Prime Minister’s Indigenous Advisory Council which the Panel consulted during the course of the review. The fourth member was a senior consultant with a consulting firm which specialises in providing services to Government. The specific affiliations of the Panel members were not listed in the Minister’s announcement of the review, nor in the review report (but see this news report from the Department issued after the report was finalised – link here).

The Department revealed in the most recent Estimates hearings that the Minister met with the review Panel on a number of occasions, but this was nowhere mentioned or commented upon in the Review Report. The Minister’s Department provided the Secretariat to the Review Panel. My point is not to cast any aspersions whatsoever on the Panel, but to highlight the fact that the Minister retained a high degree of informal influence over the shape of the review process and potentially its conclusions.  A number of the points raised below have links back to this issue of poor transparency and assurance regarding the independence of the review process from ministerial influence.

Second, the Review fails to lay out a description of the shape and key characteristics of the remote housing sector. There is no data on the size of the social housing system in each jurisdiction, the proportion of remote houses in each jurisdiction, the numbers of remote houses funded managed by each jurisdiction, the numbers of locations, the characteristics of the populations in each jurisdiction living in social housing and remote social housing, and so on. The Review commissioned a research synthesis from AHURI (published simultaneously with the Review report), but this was not directed to describing the characteristics of the remote sector.

This gap means that it is virtually impossible for a reader to assess the significance of the policy challenges facing each jurisdiction and the Commonwealth overall. For example, what proportion of the total remote social housing asset base was upgraded by the 7500 refurbishments delivered by NPARIH. We are not told. Similarly, it is difficult to assess the significance of the Review’s assessment that there is an outstanding need of 5500 additional houses as we are nowhere told how many houses are currently part of the remote social housing system.

Third, nowhere does the review report provide a comprehensive description of the breakup of the funds allocated to NPARIH and the NPRH. Thus the review fails to include comprehensive data on the year by year allocations to each jurisdiction, broken down by category. Nor does the review provide year by year data on the performance of each jurisdiction and nationally against the three key metrics (new houses, refurbishments, and Indigenous employment) over the eight years to date of the NPA and projections going forward.

An obvious consequence of the lack of a comprehensive snapshot of key program metrics is that important issues are left opaque. For example, the Review mentions that three states, Victoria, Tasmania and NSW exited the program via a ‘buy-out’ process, yet nowhere does the review provide details of the costs involved. Nor did the Minister ever announce this publicly. We are left to wonder about the cost of persuading those states to exit the program.

Or to take another issue which has become contentious, table 4.2 details the costs for new builds and refurbishments for the four continuing jurisdictions to 2016, and provides two columns outlining state construction costs and Commonwealth capital works funding, with the difference shown as the percentage of funds allocated to ‘ancillary costs’ (ie non-housing costs) by the states. The table does not provide a national total. Yet when calculated, the funding amounts total only $2.5bn in Commonwealth funding out of the total initial allocation for NPARIH of $5.5bn. The obvious and unanswered question is: what was the balance of $3bn spent or allocated on? (bearing in mind that in 2016 there was still two years to run). The review provides a reader with no basis to ascertain the answer.

Fourth, property and tenancy management (PTM) is given a lot of attention in the report, again with virtually no data presented to back up the points made. The suggestion in section 5.1.1 that PTM was ‘sidelined’ in the early delivery of the program is mere assertion and in my view is just wrong. It ignores the fact that before the program existed, there was virtually no funding and no focus on PTM by ICHOs. The shift of responsibility to state housing authorities under the program, and the requirement for 40 year leases to underpin all investment, meant that the states were for the first time responsible for tenancy management as part of their landlord responsibilities. This was a key objective of the program, and so to argue that it was ‘sidelined’ is tendentious. The NPARIH Review of Progress (2008-2013) released in 2013 (link here) reached a different conclusion, noting that:
There has been considerable progress with property and tenancy management implementation overall, but key elements such as reformed rent setting and tenant support services have not kept pace with capital works delivery in all jurisdictions. (p.11).

Moreover, there is absolutely no mention of the current Government’s decision in 2015 to cut $95m from the forward estimates for PTM (refer to para 2.15 and footnotes 28 and 29 in the recent ANAO report on the Community Development Program for the rationale for this cut; see also this blog post for a little more info on this and related issues), nor any analysis of the performance of the new Community Development Program in delivering housing repair and/or tenancy management services which was the rationale given by the Minister in Estimates in 2015 when he was queried on the cuts. Let me repeat this as it is a crucial point: the Review argues that the initial progress on PTM ‘was slow’ and that the ‘focus on PTM was sidelined’, but fails to mention that the current Government cut $95m from PTM. This hardly amounts to objective and independent analysis.

The report mentions (in section 5.1.2) that in 2016 the Commonwealth introduced outcome payments to the states for improved PTM services. Apart from the fact that this change has never been publicly announced, there is no analysis in the review of the amounts allocated and the reasons the new payments were deemed necessary. The data in table 5.1 shows Commonwealth PTM investments / allocations by jurisdiction over the period 2008-2018 (ie the life of the NPA). However these amounts also include unspecified funds allocated to three states to buy out their involvement in the program (thus obscuring the admittedly minor amounts allocated to these jurisdictions for PTM); the data is not broken down by year (it should be) and it doesn’t include original allocations as well as revised allocations. Again this is an example of poor / non-existent analysis.

Box 5.2 includes a description of state policies for asset repairs and maintenance. In relation to the NT, there is no mention of the poor performance that has led to a number of communities taking legal action against the NT in relation to poor / non-existent tenancy management practices. Yet this matter was explicitly raised with the Panel by APONT in their submission (link here).

Fifth, the headline conclusion in the review is that 5500 new houses are needed by 2028 (see section 3.3). The review itself footnotes a number of caveats to this headline figure: it is based on 2011 census data and will require updating; it is based on modelling which only includes households requiring three bedrooms or more, with the consequence that ‘the overcrowding challenge is likely to be greater’ (Fig. 3.3 text).

The report states that adding these assets to the national remote housing asset base would decrease overcrowding to ’25-30 percent’ which is around ten percent above metropolitan rates. This is still an extremely high rate of overcrowding not seen anywhere else in the country, yet there is no discussion of why the Review states in the executive summary that this is an ‘acceptable’ level of overcrowding. Assuming the Government aimed to reduce overcrowding to metropolitan rates, there would be a requirement for approximately an extra 5000 houses.  

Moreover, in Box 3.2, the review includes a list of state data on overcrowding which when aggregated shows that the states consider 7500-plus new houses are required by 2028 (WA lists only current needs). Again, there is no attempt to analyse or discuss this data against the Review’s more conservative estimate.

Finally, there is no analysis of the likely reductions in total housing assets due to assets reaching the end of their expected life.

The review fails to undertake an up-front discussion of these issues, instead adopting an analytically flawed approach of first deciding the ‘acceptable’ level of overcrowding, and then retro-fitting modelling on narrow assumptions to come up with the 5500 new house figure. While this looks respectable against the 4000 new houses delivered under the current program, such a comparison ignores the 7500 refurbishments also undertaken under NPARIH. Indeed the headline conclusion focussed solely additional houses appears to assume that there is no longer a need for any refurbishments to be undertaken.

Sixth, analysis in the Review of state housing departments’ performance is underwhelming. For example, there is no detailed assessment of PTM performance (see above). On rent collection, Table 5.5 demonstrates a number of jurisdictions’ performance has fallen between 2011 and 2016. The report notes the states suggest (section 5.5.1) that this is due to tenant cancellations of rent deductions (a matter recently addressed by the Government) or suspensions of welfare payments under CDP (a matter the Government is in denial over). What is not addressed as a factor is the poor performance of state housing authorities in responding to tenant requests for repairs (see point three above). The report identifies this as an area requiring further policy work, and it is surely correct. Given that the Government has had a draft of the report since May 2017, an obvious question for the Government is what have they done to address this issue? There is no information available publicly to suggest that anything has been done or is in progress.

Seventh, the report appears to lay out the underpinnings of an argument for a reduced financial commitment from the Commonwealth in relation to remote Indigenous housing. The review suggests that funding responsibility for remote housing has not been clear (section 1.1.1) whereas it would be just as accurate to assert that both levels of government have assumed concurrent responsibilities. It is clear that the Commonwealth has had a longstanding role in funding remote housing (see Table 1.1).

The review also asserts that there is a potential role for ICHOs in the future delivery of remote housing (section 5.6) although it does warn that this is not a solution to the funding challenges (see section 5.7). The review also talks about ‘shared responsibility’, greater sharing of risks between the Commonwealth and the states, and then without any detailed preliminary argument or analysis, leaps in Chapter 9  to a recommendation out of thin air that the cost of the remote housing program should be shared 50:50 between the states and the Commonwealth. It is only a small next step to arguing for a reduced commitment from the Commonwealth, presumably based on the rationale that it should only match state funding commitments.

A comprehensive analysis of this issue would take into account the respective revenue raising capacities of the Commonwealth and the states; assess the interaction of program changes with GST horizontal equalisation processes, and look beyond housing to the respective contributions of each level of government to issues such as land servicing, infrastructure, essential series etc.

The ‘key finding’ in para 8.3 that ‘continued investment by governments will be required beyond 2018, at least in the maintenance of existing tenancies…’(emphasis added) suggests that the possibility that the Government will decide not allocate funding for new capital investment is or has been under active consideration. This is reinforced by the rather odd section at the end of the research synthesis paper by AHURI which accompanied the Review and which provides a ‘non-comment’ on the implications of a stall in investment. Clearly, someone asked them the question: what would a hiatus in funding mean?

Eighth, there is an extended discussion in Chapter 7 on Governance which ignores the transformative design of the NPARIH program, aimed at empowering the states and NT to deliver social housing under what was a new Intergovernmental Agreement on Federal Financial Relations which explicitly removed detailed input controls form intergovernmental transfers. While the Review discusses these reforms, its discussion is premised on a reversion to former ways of doing business, focussed on detailed input controls. This is a recipe for even greater confusion over responsibilities.

Conclusion

The eight high level issues above represent my assessment of the major flaws in the Review.

There are a range of lesser points worth mentioning: the arguments against the competitive bids process (see sections 4.7 and 7.1.1) are weak, not supported by adequate evidence, and ignore evidence to the contrary; many of the recommendations overall appear to come out of thin air; the finance analysis is underdone, at one point suggesting that PTM might be cut further (see section 8.1.2) and that targets for reduced taxpayer subsidies to social housing ought to be introduced (section 8.3).

In my view, these flaws arise from an attempt to gloss over or justify decisions made by the current Government in administering the program since 2013, and to lay the groundwork for announcing a new framework which will, under the cover of requiring greater investment by the states, likely deliver a reduced level of investment in remote housing by the Commonwealth in the decade ahead.

My final observation relates to the fact that this Review was auspiced and directly supported by the Department of Prime Minister and Cabinet. In the last couple of years, the Department has argued that better evaluation and policy analysis is the solution to successfully addressing Indigenous disadvantage. The Department cannot be held responsible for the conclusions of an ‘independent’ Review panel. However, the Department provided the secretariat to the Review, and thus did have a role in ensuring the analysis and research which underpins the Review report is of a high standard. It is worrying therefore that the Department has allowed the partial and rather poor analysis embedded in this Review Report to see the light of day. It would be even more worrying if they allowed the Report to be used as the sole basis for Cabinet consideration of the future of the Commonwealth’s role in the supporting the remote Indigenous housing sector.

The next post will assess the policy issues which will shape the next phase of government engagement with remote housing provision.





Disclosure: In the interests of full transparency, I should indicate that I worked as an adviser to Minister Jenny Macklin from 2008 to 2011, and as a senior public servant with responsibility for NPARIH from 2011 to 2013.