During the pandemic,with the economy in need of a jobs-intensive stimulus and thousands more Australians facing homelessness,economists say the business case for building more of this social housing has become stronger than ever.

"We are staring down a tsunami of homelessness,"warns Bevan Warner who heads up the not-for-profit service Launch Housing in Melbourne."We started with a housing crisis in Australia and it became a health crisis,which became an economic crisis. Now we have an opportunity to solve all three."

So how much social housing do we need and what will it cost? Why was it missing in the federal government's big-spending budget? Are COVID emergency measures helping end street homelessness? And how have other countries such as Finland done it already?

How is homelessness defined – and how common is it?

No one knows exactly how many people are homeless in Australia. For every person sleeping out,dossing down in doorways and carparks,many others are crushed into overcrowded shelters and boarding houses,or put up on couches and in garages. On the last census night in 2016,more than 116,000 Australians were recorded without secure housing,8200 of them sleeping rough. That’s generally considered an underestimate.

But when the pandemic hit our shores in 2020,the true scale of the problem became clearer than ever. About 40,000 people were put up in hotels in Victoria,New South Wales,South Australia and Queensland as part of an emergency COVID response between March and September,vastly outstripping existing rough-sleeper counts. Researchers say the real number housed is likely even greater.

“We may never know the full story,” says UNSW Professor Hal Pawson. ’It’s amazing what[was] done so fast. Of course,it wasn’t about ending homelessness,it was about stopping the virus spreading.”

Warner says that,while the rapid response of state governments deserves credit,many of those housed during the crisis had already been churned in and out of support services for years (in Melbourne,an average of eight years). Victorian government statistics show more than 70 per cent of people assisted by homeless services in 2018–19 were still homeless at the end of
support,for example. “Clearly,the system hasn’t solved their homelessness,” Warner says. “We’ve just been treating the symptoms,not curing it.”

Why are people homeless?

On the street,people offer familiar reasons for how they got there,tragedies and misfortunes that seemed to hit all at once:deaths and relationship breakdowns,job losses,car crashes,abuse. Family violence is now the leading problem pushing people,many of them children,out of their homes. Mental illness and disability are also common,and Indigenous Australians are more likely to find themselves without a roof over their head

For Petersen,it began with the sudden death of his long-time partner."I'd been working in a hotel but I had to move away after that,I was devastated,and broke from raising the money for her funeral."After renting with a friend didn't work out,Petersen jumped on a train."I just thought I'd travel until I could figure out what to do."

But he didn't find anywhere he could afford to rent by himself and those nights on the train turned into years.

For other rough sleeping"regulars"such as Kent,who has struggled with serious mental illness and addiction as well as literacy problems due to dyslexia,housing came with too many hoops to jump through,getting clean on the street was too hard,shelters too cramped,pets too precious to give up for a bed.

"I used to get work ... then it got harder,"Kent says."When you're sleeping in public toilets,and you haven't had a shower in two weeks,you're out of jail,no one will give you a go. I couldn't even fill out the forms with my name and address. I couldn't sleep. So I used drugs to stay awake on the street."

Or take the story of new mother Ashley in NSW:after her own childhood was interrupted by homelessness,she says she didn't have the documentation she needed to qualify for long-term housing,no ID nor rental history.

Homelessness doesn’t happen to a certain kind of person. Many are just on the wrong side of Australia’s housing boom,born without a social safety net or priced out of increasingly competitive rental markets.

Michele Adair,chief executive of the not-for-profit Housing Trust which helped Petersen,says people were in precarious positions even before the pandemic."Even me,when I divorced years back,I had two little kids and we came very close ourselves.

“Now COVID seems to have woken[people] up. It’s always been someone else doing it tough,just junkies and no-hopers,now suddenly it’s their mum,their brother,their friend in trouble. We have teachers and nurses,essential workers,in serious housing stress. This is everyone’s problem.”

As street homelessness has become more visible in our cities in recent years,it’s hit an “embarrassment threshold” for governments too,Parsell says,triggering more spending on crisis support such as street outreach. But there’s not enough places for them to go. Public or social housing,which offers secure tenancies to the people most in need at 25 per cent of their income,has not kept up with population growth,blowing out wait times into years,even decades. As of June 2020,there were almost 160,000 families in that queue around the country.

Pawson says decades of belt-tightening has seen social housing effectively halved since it reached its peak around the 1990s. Just 4 per cent of all homes in the country (or about 396,000) are government stock – compared to more than 15 per cent in the UK,20 per cent in Denmark and about 25 per cent in countries such as Scotland and Finland,where housing is enshrined as a right under the law. Victoria has the lowest social housing supply in the country per head,and South Australia the most.

What is the single best solution?

When we follow people such as Petersen and Kent through the system,research shows one pathway has a better ending than most. It’s called Housing First and it means offering social housing to the people most in need without the usual conditions,such as income and sobriety. Once a need is identified,the first priority is finding that person a stable place to live – addressing their other issues,such as addictions,can come next. It was first tried in the 1990s in New York by psychiatrist Sam Tsemberis,who had begun recognising his former patients sleeping on the street and realised many people just weren’t making it through the system. Where Housing First has been rolled out since,including Scotland,Canada,and Scandinavia,people are more likely to turn their lives around.

UQ researcher Andrew Clarke says places such as Finland have stood out for enshrining the model into national policy. Finland spent 250 million euros ($418 million) building 3500 new homes,and hiring 300 extra support workers but long-term expects to save 15,000 euros ($25,000) a year for every person housed. Homelessness is down 35 per cent since 2008,and long-term homelessness has more than halved. In the capital Helsinki,you don’t really see rough sleeping any more – just one shelter remains open during winter.

Australia’s COVID hotel response has shown Housing First can work on a big scale here too,Parsell says,even if most housing offered so far has only been temporary. “NGOs told us that for the first time that they could remember they were able to get every person they saw a bed,and people who wouldn’t normally take offers,the ones wary of being shuttled through shelters and back out again,they were saying yes too.

"There's been successful pilots in most capital cities in Australia. The hard bit is scaling it up – and getting those support services in place to help them rebuild their lives."

During COVID,some states have had a real crack at housing people permanently while they are off the streets. Both New South Wales and Victoria have committed tens of millions of dollars to move a couple of thousand people from hotels into rentals,including caseworker support. (In New South Wales,close to 600 people were placed into secure housing in the first six months – the number usually housed in two years,says NSW Minister for Families,Communities and Disability Services Gareth Ward.) Short-term,the states hope to get around the social housing shortfall by head-leasing:taking up the lease of private properties and paying the gap between market rent and what someone in need can afford. But both schemes last only two years and have moved slower than hoped.

The United Kingdom ran a similar transition program during the pandemic and by early 2021 it had housed two-thirds of the 30,000 people it put up in hotels. In Australia,about 8000 rough sleepers had left emergency COVID hotels by September 2020 but only a third of those had been helped into longer-term accommodation.

Kent,like many of the people put up in hotels during the pandemic,was at once grateful and wary. Surely it couldn’t last forever? Now since moving into his long-term rental in Melbourne with help from Launch,he’s managed to kick drugs for the first time in decades. “Things taste better. I have my own pillow. I can actually sleep.”

Of course,there are things Housing First can’t fix,as founder Dr Tsemberis himself has acknowledged. It can’t fix a mental health system that’s failing the vulnerable,or a housing market stacked in favour of wealthy investors. It can’t fix poverty itself. And,while Australian experts agree building more social housing is the best solution in the long run,many frontline workers also stress that more crisis beds would help people sleeping rough in the meantime.

What's the business case for social housing?

University of Melbourne economist Lisa Cameron lives in what was once a public housing unit,built during the Second World War,and says the business case for building more social housing today is as strong as it was in 1945. Again the economy needs big spending stimulus. And,with the bond rate now low (around 0.8 per cent),she says the federal government can borrow money for virtually no interest. (As former prime minister Paul Keating told ABC Radio in September:“We could be building public housing ’til the cows come home.“) And then there are the flow-on benefits – not just jobs for tradies but more people back on their feet and contributing to the economy.

When the Economic Society of Australia polled 49 top economists on their ideal wish list for COVID recovery spending,social housing topped the list (just ahead of permanently boosting welfare payments). But it was absent on budget night 2020. Instead,Treasury earmarked $1 billion worth of cheap loans for community providers to help them build more affordable housing (private rentals generally offered around 20 per cent below market rent).

At the time,the Coalition acknowledged that more social housing might also be in order but insisted the money should instead come from the states,though both levels of government fund it. In 2021,that position hadn’t changed (but more money was put into frontline domestic violence services).

Clarke says that the initial post-World-War-II heyday of public housing was driven by the Commonwealth as were resurgences during the 1970s and,briefly,during the financial crisis stimulus splash by the Rudd government. “It’s always come from the federal government,they have the deepest pockets for revenue. The states can’t do it alone.“

Federal Labor shied away from promising more public housing at the 2019 election but in May 2021 itpledged to fund 20,000 new properties in five years if elected, 4000 of them specifically for women and children fleeing violence as well as older women on low incomes. This new $10 billion fund would also create 10,000 affordable housing properties for frontline workers,and generate an expected 21,500 jobs each year. Labor leader Anthony Albanese spoke of a rare chance to reinvent Australia’s economy
post-COVID as he unveiled the plan,adding:“I grew up in a council house in Camperdown,the only son of a single mum on the disability pension. I’ll never forget that I’m here tonight because good government changed my life.”

The proposal has been received as a decent “first step” by the homelessness sector,even if it has been dwarfed in ambition by Victoria’s own big build. In late 2020,the state announced it would create 12,000 new public housing units in four years. That will cost $5.3 billion but is expected to generate $6.7 billion in economic activity,including more than 10,000 jobs a year.

Grattan Institute economist Brendan Coates says a national social housing build would offer more construction jobs than the infrastructure projects so far at the centre of the Morrison government’s COVID stimulus,and would boost the economy more than tax breaks. While Australia’s economic fortunes are recovering faster than expected,Coates says there’s
still a case for further stimulus into 2021 and beyond. And,at the end of a big social housing spend,Parsell notes,we’d be left with something even more meaningful than economic growth. “You will have changed lives. And the country will have a housing safety net.”

How much social housing do we need?

Pawson was among researchers who calculated that Australia would need to build 15,000 new social units a year just to keep pace with population growth. That was before the pandemic stamped down migration. But while the forecast will have changed to some degree,he says more people are about to find themselves in poverty for the first time as eviction bans and income support during COVID wind down. And that
has created a stampede in the cheaper end of the rental market,Warner says.

Some experts would like to see Australia ramp up its social housing stock considerably,until it's more in line with countries such as the UK at 10 to 15 per cent. But Coates says even growing the stock back up to 5 per cent would mean building about 100,000 new homes in total,which he estimates would set the government back about $30 billion.

"That's as large a number as I can imagine a government going in one hit,even one committed to doing something big,"he says."We'd recommend building 30,000 homes for about $10 billion to start."

While there are clear savings to offering housing to the most vulnerable,he says value for money fades once you start putting those further up the ladder into social housing. “I don’t think everyone on a low income needs social housing. Early intervention and raising Renter’s Assistance and[other welfare] is a more effective way of targeting those people who can stay in the private market with a bit of help.”

Some countries which have rolled out Housing First widely,such as Scotland,already had high levels of social housing."They have billions of dollars of these assets,"Coates says."For us to build or buy up that much stock would be hugely expensive. Singapore has great housing as well but the government owns 80 per cent of it."

There are cautionary tales too,most recently in New Zealand where Prime Minister Jacinda Ardern's ambitious plan to build 100,000 affordable houses in 10 years was abandoned after just two years,miles behind its targets. Many of the homes had been built in areas no one wanted to live. Attempts to scale up Housing First across the US under the Bush administration also failed to plan the builds appropriately and many were not directed at the people most in need,and so did not make up enough savings by offsetting their costs.

Pawson agrees that what works in one country can't simply be copied across to another."What Finland did is not a magic bullet. You need to adapt it."

And big interventions may require changes to the law,too,not just budgets. An enshrined right to shelter is coming into vogue in some parts of the world where Housing First is scaled up,including Finland,Scotland,France and Canada. In other places,such as in the United Kingdom and Europe,local authorities must ensure people have alternative housing before they can be evicted.

Could private investment save the day?

As it has for most social problems,the private sector is already working to tackle homelessness,in its way. But,while clever plans to repurpose unused office space or car parks as accommodation are welcome,experts say the market alone cannot solve homelessness.

Australia could offer tax incentives for private enterprise to invest in more affordable housing or social housing run by charities – as happens in countries such as the United States with a long history of philanthropy. A mix of social and affordable housing can make developments more appealing to investors,including governments,and stop concentrating disadvantage in entire neighbourhoods. Warner says about $13 billion in tax credits is already given out each year via negative gearing to help Australians buy a second or third home so “why isn’t there anything for people without one?”

But Coates offers a warning from our not-too-distant history. When the Rudd government invested in housing to stimulate the economy after the global financial crisis,it launched two main programs. The first spent $5.2 billion to build 20,000 social housing units and refurbish 80,000 others in two years and,after coming in on time and under budget,was heralded a success. The second,which offered tax incentives to private enterprise to build affordable housing,cost $3.1 billion but was abandoned as a failure in 2014.

The problem? Coates says the government handed out too much money to the market for what it could have done itself at half the cost.

Affordable housing is cheaper than social housing. In the case of the Rudd-era scheme,that should have cost the government just $4000 a year per household but instead,a Grattan analysis found,it was paying $11,000,almost as much as public housing. It was,effectively,a $7000 windfall for the private sector.

How can cities help solve the problem?

While solutions often struggle to find purchase at a national level,cities around the world are making a real difference. In northern Italy,Trieste has radically reduced homelessness by reshaping mental health policy. And 11 cities across the US have already reached a standard called"functional zero",meaning when homelessness does happen it's rare and it's brief.

Adelaide and,to some extent Sydney,are shooting for the same target and working to improve street counts and co-ordinate their data across support service. The idea is to know everyone on the street by name and circumstance,so resources can be targeted. Some centralised models overseas have been likened to contact tracing or the programs that once helped eradicate smallpox. At Launch,Warner hopes to turbocharge the approach in Victoria,under a “Melbourne Zero” plan he says will need community buy-in as well as government support and transparency.

"It's about saying,'OK Melbourne,we've taken a big hit but as we rebuild and reclaim this city,let's meet this moment too. Let's get to zero,and[track how we're doing] against other cities. Let's use real-time data to respond to what we're seeing on the street. Let's know their names. Let's stop walking by."

This article has been updated since its publication on October 20,2020 to include relevant spending announcements from governments in Victoria and NSW as well as federal Labor.