Operating deficits and public housing: Policy options for reversing the trend: 2005/06 update

A key constraint for mainstream public housing is that the net revenues after rebates at least pay for operational costs, (net of interest paid or received). If this is not the case, any addition to stock expands the additional funding requirement to pay for the deficit. In these circumstances the only option for reducing or freezing the additional funding requirement is to sell stock and therefore reduce the number of households provided with longer term assistance. The rate at which these operating deficits are growing, and the timing of when they will outstrip current real levels of grant funding is of critical policy concern. Clearly continuation of the current trends may carry with it the risk of a potential paralysis of housing assistance policy development, and a possible forced withdrawal to private rental subsidies as the only method of continuing housing assistance, with the possibility of a future fiscal blow-out. The aims of this project were therefore to: clarify the impact of public housing operating deficits on the development of comprehensive and expansive housing assistance policies; develop suitable policy options for returning public housing to operational surpluses; and by so doing; provide a context for more comprehensive and expansive housing assistance policies. The project addressed four key research questions: How should operating deficits be defined? (addressed by discussion paper, and research questions). What are the trends in operating deficits and are they or are they not restricting stock additions to public housing? (addressed by public housing accounts analysis and CEO questionnaire/interview); What are the reasons for the development of operating deficits and what are the influences of particular cost components?