Work disincentives: the road to worklessness

18 November 2011 | Posted In: #117 Spring 2012, Centrelink, Employment, Housing Types and Issues, Public Housing, Public Housing – Policy changes, | Author: Charmaine Jones

By Charmaine Jones

The government’s latest remedy for the poverty and inequity of those living in large social housing estates is ‘social mix’: the deconcentration of public housing through the creation of engineered mixed tenure/mixed income communities.

The theory is that by having wealthier neighbours, poorer people will have better opportunities for greater economic and social participation.

While there is much debate in political and academic circles about social mix, one thing is certain. The model treats the symptoms of poverty rather than the causes, and does nothing to address the penury cycle created when a person resides in a social housing property and is supported by a statutory government payment.

The by-line of the blog, Diary of a Desperate Houso, states that the blogger is “caught in a poverty trap between the pincers of Centrelink and Housing NSW”.

This is, unfortunately, a sad statement of fact for many social housing tenants who are capable of being gainfully employed. Many of these people don‘t work simply because work disincentives created by the tensions between Centrelink policies and Housing NSW policies prevent them from doing so.

Work disincentives are costs or conditions that discourage persons from increasing their incomes through work – in other words, finding yourself in a financial situation in which you would keep so little of your increased income for yourself that it is not really worth the effort of increasing it.

There is evidence that a Centrelink recipient who takes on lowly-paid work will, after the loss of the health care card and concessions related to it, have a net financial gain of between 15-35 cents for each additional dollar earned.

A person working part-time only has to earn enough to have $1 deducted from their Centrelink NewStart payment and they lose their transport concession. So, although they may only be working one day a week, they will pay full-fare anywhere they travel for the rest of the week.

Add to this the effect of rent-setting and tenancy tenure based on income, and social housing tenants face a double disincentive to gain and sustain employment.

Housing NSW offers all new clients who fit the eligibility criteria fixed term leases of 12 months, two, five or ten years, depending on the extent and length of the need. A tenant is not eligible for an extension to their lease if the total weekly household assessable income is more than the weekly income limit for lease review, which is $694 gross for one adult or a combined income of $885 gross for a couple.

So, after having waited (in some cases for years) to be offered social housing, an entry into employment may mean a tenant loses their eligibility status and is given a notice of termination.

In a market where there is only one affordable rental property for every four low-income households, this is a frightening prospect.

If we consider the reasons people met the eligibility criteria for social housing in the first place, we must presume some crisis or disability had led them to this point. Employment may be possible, but is not always sustainable, and to maintain rent in the private market is too heavy a burden for some to bear. They are left with the choice: job or roof? And as it is very hard to maintain a job without a roof, by necessity, most choose the roof.

If a tenant continues to work, but earns less than the $694, or they are on continuing leases, they are still faced with a rent based on income.

A social housing tenant paying 25-30% rent on gross income can find that after tax, HECS/HELP, the Medicare levy and other deductions, up to 70-85% of net income is being paid in rent.

Also, tenants who live in properties without separate water meters pay for their water as a percentage of their income, so despite there being no increase in the use of water, the tenant experiences an increase in the water cost.

The increase in rent and the loss of tenancy are factors often cited by tenants as disincentives to move into work. But rent-setting is not the only discouragement to work when living in social housing. The nature of public housing estates means they are often in fringe areas.

For people living in these estates, employment can mean hours of daily travel, and Housing NSW is unlikely to offer a tenant a transfer solely on the premise that they need to be closer to employment opportunities.

Housing NSW has created a catch-22. To be financially sustainable, Housing NSW needs to have some tenants paying market rent or close to it. But due to a shortage of properties, its policy of targeted eligibility means only those on a statutory income are housed. These are the very tenants who are unlikely to find financial benefit in employment.

Academics and politicians continue to make noise about generational welfare dependency, but until the federal and state government realise housing and employment are linked (and therefore their governing bodies need to be), little is likely to change. There needs to be a means for the capacity of all people to contribute meaningfully to economic and social development of their communities. The federal and state governments need to recognise this and institute policies accordingly.

Originally published in Inner Sydney Voice, Issue 115, Summer 2011