Australia is spending more than ever on housing support, but the outcomes tell a different story. In a keynote address to a major conference by the Australian Housing Studies Association in February Julie Lawson will show how social housing’s share continues to shrink, rental affordability is worsening, and supply consistently falls short of need. The central issue is not the quantum of expenditure but the absence of a mechanism that converts public spending into durable, long-term affordable rental capacity.
We have a system that continues to commission projects but has not built sustained growth. Instead, it’s built around landlord subsidies, not public value.
Despite decades of policy debate, Commonwealth housing settings remain overwhelmingly oriented toward demand-side assistance. Commonwealth Rent Assistance now exceeds $5-6 billion a year, directed almost entirely to households renting in the private market.
At the same time, tax concessions, particularly negative gearing and the discount on capital gains tax, cost the Commonwealth around $10-15 billion annually. These expenditures are not counted as “housing budgets,” but they shape the rental market profoundly: encouraging investor demand, inflating asset prices, and limiting fiscal space for long-term affordable supply.
These expenditures are not counted as “housing budgets,” but they shape the rental market profoundly: encouraging investor demand, inflating asset prices, and limiting fiscal space for long-term affordable supply.
The consequences are visible in aggregate outcomes. Social housing has declined from 5.2 per cent of all dwellings in 1997 to just 3.9 per cent in 2023, even as unmet need has intensified and the private rental sector has become the default tenure for a growing share of lower-income households.
Tax concessions, particularly negative gearing and the discount on capital gains tax, cost the Commonwealth around $10-15 billion annually
Australia’s rental system now relies heavily on private landlords while underinvesting in the institutional capacity required for secure, affordable, non-market provision.
This imbalance is finally attracting scrutiny. The Senate’s Select Committee on the Operation of the Capital Gains Tax Discount is examining the effects of the CGT concession on inequality and housing outcomes, with a final report due in March 2026.
At the same time, RMIT researchers have proposed a national rental regulation system that links Commonwealth fiscal support – both subsidies and tax concessions – to performance, transparency, and measurable housing outcomes.
The common thread is an emerging recognition that the architecture of Australian rental support is not delivering the affordable homes the country needs.
Project-by-project investment cannot grow a system
RMIT and Sydney University research on Australia’s social housing system, funded by the Australian Housing and Urban Research Institute (AHURI) highlights a structural problem: Australia’s recent investment model is not a growth model.
Instead, supply expansion relies on intermittent, competitive, project-based funding rounds. These rounds are time-limited, administratively intensive, and often disconnected from evidence of need or long-term portfolio strategy. They produce sporadic bursts of activity, not a compounding base of equity in assets that can support future growth.
The shift to community housing since the early 2000s has expanded the number of providers and brought new expertise into the sector.
However, much of the reported growth was driven by stock transfers from state housing authorities and public accounting rules, rather than need or net additions.
Meanwhile, the sector has become increasingly concentrated, with a large proportion of dwellings managed by a small number of large providers.
This consolidation reflects financial scaling and reporting pressures more than a deliberate diversification of governance models.
These structural weaknesses: capital scarcity, variable funding cycles, and fragmented procurement, sit in sharp contrast to resilient affordable housing systems internationally.
Denmark and Australia have embedded non-profit housing
In countries such as Denmark and Austria, non-profit housing organisations are institutionally embedded, locally anchored and supported by sector-wide reinvestment mechanisms.
Tenant engagement is part of governance, not an add-on. These systems grow because their operating rules, financial architecture, and institutional design are aligned around long-term public value.
Financial settings that extract value rather than build it
The introduction of the Housing Australia Future Fund (HAFF) was intended to represent a shift toward long-term financing. But the design of HAFF largely reproduces Australia’s project-oriented logic. The fund rests on a $10 billion capital base, with most housing delivery structured through long-dated availability payment contracts similar to public-private partnership (PPP) models used in other infrastructure sectors.
The OECD has provided legal advice to governments to ensure they govern social infrastructure wisely and for the long term. Evidence from the infrastructure PPP literature shows that availability-payment models deliver contested value for money, higher financing and transaction costs, and weak incentives for long-term asset stewardship, making them a poor fit for social housing systems that depend on durable public ownership and cumulative balance-sheet growth.
Public reporting indicates that by mid-2025 HAFF completions were in the hundreds, not the thousands required to meet the target of 40,000 homes by 2029. This reflects not permitting or delivery delays but a structural design problem.
Availability payments commit governments to decades of expenditure without creating a revolving pool of retained surpluses that can be reinvested in new supply: recurrent public money flows out, but public housing capacity does not accumulate.
In many arrangements, community housing providers function merely as contracted managers rather than as long-term asset stewards. Unlike cost-rental and publicly capitalised housing systems that recycle operating surpluses through revolving funds, availability-payment models lock in future budget obligations without generating institutional or balance-sheet capacity for expansion.
The HAFF and Accord Impact Analysis implicitly assumes that availability-payment and PPP-style contracting offers a cost-effective and scalable pathway to long-term social housing growth, largely by transferring delivery and financing risk off the public balance sheet.
However, international audit evidence and the public administration literature consistently show that such assumptions are weakly founded: value-for-money claims are highly sensitive to contested discount rates and risk pricing, long-dated contracts embed higher financing and transaction costs, and off-balance-sheet treatment can obscure long-term fiscal exposure rather than reduce it.
Most critically for housing, availability-payment models do not generate retained surpluses or revolving capital that can be reinvested in new supply; instead, they lock governments into fixed expenditure streams while asset control and institutional learning remain fragmented.
As a result, while these arrangements may smooth annual budgets and accelerate project financial close, they are structurally ill-suited to building cumulative public housing capacity or durable, tenant-centred housing systems.
Over the past decade, a relatively small group of financial, legal and infrastructure advisory firms has become involved across multiple housing programs. Their models emphasise risk transfer, complex finance and lease structures.
Yes, they offer off-balance-sheet delivery, features that may suit politicians announcing major infrastructure projects, but SPV are also opaque, by-passing the national regulator (NRSCH), and do not necessarily build enduring public housing assets.
Australia’s National Regulatory System for Community Housing (NRSCH) cannot directly regulate Special Purpose Vehicles (SPVs) used in PPP-style social housing projects.
It regulates registered community housing providers (CHPs) only, and only to the extent that regulated activities sit within the CHP entity itself. This institutional landscape of SPVs reflects deals that externalise development, financing, and risk management rather than embedding them within Australia’s housing institutions. But it does not reflect OECD advice.
The HAFF under scrutiny
The forthcoming performance audit by the Australian National Audit Office, due May 2026, is therefore not just an accountability exercise. It provides a rare opportunity to assess whether HAFF is capable of delivering durable supply at scale and growing this over time, and if not, how it can be redesigned to support long-term affordability, stewardship, and public value.
What resilient systems look like
While Europe does not offer a single template for affordable rental housing, several long-standing systems stand out for their capacity to expand and maintain affordable supply across generations.
In Vienna, municipal land banking, capped land prices for subsidised housing and long-term building leases (Baurecht) keep costs stable and ensure ongoing affordability. Rents are set on a cost-rent basis, and surpluses must be reinvested in renewal or new supply.
In Denmark, the National Building Fund (Landsbyggefonden) acts as a sector-wide revolving fund that finances renovation, energy upgrades, and new construction. This mechanism enables continuous improvement and protects the system from political and financial cycles.
In Paris, social housing growth has been underpinned by statutory inclusionary zoning (the SRU law), strong municipal land mobilisation and value capture in high-value areas, coupled with ambitious climate-aligned retrofitting programs.
In Helsinki, extensive public land ownership, around 63 per cent of the city, enables long-term land leasing and cost-based rents, while the municipal provider Heka undertakes systematic maintenance and energy efficiency upgrades that reduce operating costs and extend asset life.
Despite their differences, these systems share a set of common principles:
- land treated as a long-term public resource
- rents aligned to cost rather than market yield
- mandatory reinvestment of operating surpluses
- institutions empowered to plan and grow over decades
The lesson for Australia is not that any particular instrument should be copied but that resilient rental systems are intentionally built.
They grow because their financial and institutional arrangements allow them to accumulate value rather than continually repurchase it.
From funding rounds to financial stewardship
A credible growth mechanism for Australia would shift from contest-based project procurement to capital-led, mission-driven investment. AHURI’s evidence and related research already point to the key ingredients:
1. Embed cost-rental principles in regulation
This means transparent auditing of costs, rents, subsidies and performance. Cost-based rent setting – paired with income-based assistance where needed – supports both affordability and financial sustainability.
2. Require reinvestment via revolving funds
Operating surpluses, asset-sale receipts, and debt-service savings should flow into dedicated reinvestment pools that fund maintenance, renewal and new supply.
3. Strengthen provider balance sheets
Public investment should accumulate equity within housing institutions over time, enabling them to plan long-term, invest counter-cyclically and maintain assets to high standards.
4. Align tax settings with long-term stewardship
Reform of investor tax concessions could support cost-rental delivery and reinvestment rather than speculative demand.
Australia can continue to commission projects through one-off rounds and wonder why the crisis deepens. Or it can build a system capable of generating and sustaining the affordable homes the country needs.
A genuine growth engine would convert public spending into enduring assets, institutional capacity and neighbourhood-level stability – shifting the focus from short-term delivery to long-term public value.
Julie Lawson is Adjunct Professor at RMIT based in Europe and in Australia to give a keynote to the Australasian Housing Research Conference in Brisbane 10-13 February.
Dr Liam Davies is a lecturer at RMIT Centre for Urban Research and will also give a paper on Evolutions in Australia’s Multi Provider System.