Another employment trap: more disincentives for public housing tenants to work

Public housing plays an important role in providing low income and disadvantaged people with a stable and secure environment and reducing the financial stress of paying high rents and mortgages.

Today, public housing is only provided for people on the lowest incomes living with the highest levels of disadvantage who have few alternatives when it comes to housing. Thousands of people remain on waiting lists, which in reality will probably never be housed.

Public housing tenants have a much lower rate of employment compared to other housing tenures however research confirms that the majority of public housing tenants want to work even though they face extra barriers to getting jobs including disability, mental and physical illness and a lack of education, training and skills. Unemployed people often re-enter the workforce with only part time or casual low-paid jobs and still have to pay the extra costs associated with working including travelling, parking and childcare. When income goes up, rent goes up too and for many, the small gain they might receive after their rent increases is just not worth it and they face an unemployment trap.

A young person’s ability to participate in employment critically depends on the fortunes of the adults they live with, some of which are long-term unemployed. The children who do manage to get work might be the only employed members of their family. New Housing SA rules will see the children of public housing tenants, as young as 16, who manage to get a job, pay 15 per cent of their income in rent. Most Australians, including public housing tenants, would say that this is fair. It is unlikely however that this policy measure will improve employment participation by unemployed public housing tenants or their children.

It is also very worrying that if a child becomes the only breadwinner in the family, rents go up and concessions are lost, families will experience extra stress that could lead to the breakdown of their supportive relationships. More flexible rent policy settings, rather than just up and down according to income, should be explored.

Family breakdown is one of the most common reasons why young people become homeless and there are also fears that this change to the way rents are calculated could lead to higher numbers of homeless families and young people. Homelessness services are operating at capacity and already turning away people in need of emergency assistance, including children.

The effect of income-related housing assistance programs is ambiguous and can impact on labour supply in different directions. To truly address work disincentives, it is critical to consider housing costs and assistance as well as the relationship between work, benefits and tax. A strictly economic interpretation of work disincentives ignores the non-financial behavioural factors that are so important in decisions about getting a job. For many, having a job is reward in itself not only because of financial improvement but because of the accompanying increase in self-confidence and self-esteem.

These changes are touted to contribute to $6 million a year savings to the State government. If they go ahead, the government should be called upon to re-invest the savings in maintaining public housing stock and growing the public housing sector so there are more homes for disadvantaged people. To promote opportunity and inclusion, as well as the security offered by public housing tenure, long-term support for disadvantaged families and increased access to education, training and employment programs specifically for people on low incomes should be an urgent priority for the government and the community.