How to house good economics

State houses are a legacy from the heroic age of social security, which became the welfare state. Workers and their families were to be housed better than the market did it. That was thought right and just, as were good education and health care and decent wages.

Then came the 1980s and targeting to need and the 1990s assumptions that the market, partially subsidised, was best. There were co-payments for health care, higher student fees and only the minimum wage floor under incomes.

That period was a Murray McCully high point: a big sell-off of state houses and “market rents” with a partial subsidy.

Then came the 2000s “third way”: building up the number of state houses, a return to lifetime tenancy and a ban on selling, even to upwardly-mobile tenants who could thereby have helped lift their neighbourhoods.

Because demand far outstripped supply — as for health care and tertiary education — this became essentially a policy of new rents going to the most needy applicants (and by postcode). That was a far cry from the original socialist ideals.

Now we are in the age of mass customisation, which the architects of the 1930s state house policy could not have imagined: goods and services customised to a far more diverse society’s consumers’ needs and desires, even if produced in and for large numbers, as public services are.

This will change the way the state conceives and delivers services. In 30 years fewer schools will be state education factories. Health services and funding will likely be more differentiated and complex. Social assistance will likely owe much more to “social entrepreneurs” for ideas and delivery.

This is the context for last week’s housing advisory group report, issued after a four-month delay by ministers. It is an element in the evolution of social policy to match a society that, at least among its younger members, no longer assumes 1930s-1970s state solutions work best and most fairly.

That doesn’t automatically revive the 1980s-90s mantras that the state is no friend. The advisory group, even with its private sector and property developer part-membership, is clear: there remains a big, critical role for “social housing” because the market doesn’t deliver to need.

But it does recommend big changes. Among them:

* a focus on need and an end to tenure for life (though not “termination of existing tenancies for termination’s sake”), underoccupied houses and undercapitalised land — more active management of the stock, including sale to tenants and selling “properties and portfolios where there is low demand or which are not fit for purpose”;

* more private sector and not-for-profit involvement, including partnerships with the Housing Corporation and “contestable” provision by approved “social landlords”, as in Britain;

* cheaper houses by freeing up planning constraints on development (but how do far-flung suburbs’ dwellers get to work?) and 2000-2500 “new affordable dwellings” in five years;

* more flexible state assistance and “stepping-stone tenures, tailored to income and need”; more help to buy houses on the open market would help.

If ministers see elements of the report as a way to trim spending, parallel with the Welfare Working Group’s thrust, that would add to social strain and/or just shift costs. Some of those costs would fall on other parts of the state, such as the police, courts, corrections and the benefit system — as ACC cuts have displaced spending to the health and benefit systems — or on charities and not-for-profits.

Short term, that strain could be relatively readily redressed by a different government with different priorities and a more relaxed fiscal policy.

But there is a longer-term issue.

At the core of the government’s economic policy is a bother that too many teenagers come out of the education system unemployable, which is no way to catch Australian wages. That is why the cabinet has hamfistedly got itself into a stoush over “standards” with teachers whom cooler and wiser heads would have set out to coopt.

Poor housing contributes importantly to poor health, substandard “families” and households and thus a poor start in life which is an important contributor to the poor numeracy and literacy rates.

A recent New Scientist article links rates of teenage births in Britain to life expectations, which are shorter in poor neighbourhoods, where typically housing is also poor. A similar study here might have implications for housing policy and action.

The lesson: it makes good economic sense to fix up people’s houses so they are warm and not too crowded and are part of the sort of neighbourhood people like to live in and so live longer.

Embedded in the advisory group’s somewhat hasty and uneven report are whiffs of this sort of thinking. Stir in the sorts of thinking coming from “social entrepreneurs” and the mounting evidence from medical and social science and a future cabinet might reassess the payoff from investing money in good housing.