Información Vector

Finding 1: Social housing can be considered infrastructure

There is common ground between the ways in which social housing and infrastructure are respectively conceptualised. Although the shift from dwelling-based subsidies to individual subsidies has problematised some aspects of the connection, social housing, like infrastructure, is still broadly understood as a form of spatially fixed, materially realised capital expenditure, the provision of which enables the delivery of a service (in this case, housing assistance) that could not otherwise be made available.

However, the claim that social housing is infrastructure is merely rhetoric, unless it is translated into practice by establishing the benefit of the social housing service relative to the cost of providing it via an enabling asset, and expressing this benefit-cost argument in the format of a conventional business case analysis. This need to operationalise the rhetoric implies that, in essence, whether or not social housing is infrastructure is less relevant than the need for social housing providers to behave as if it is. Using infrastructure policy tools like cost-benefit analysis enables social housing providers to press their claim to additional investment through channels previously unavailable to them.

There are notable risks involved in the uncritical adoption of such an approach. Current infrastructure practice prefers assessments of value and risk that proceed from private market pricing. Conventional cost-benefit analysis requires service delivery to be measured and expressed in quantifiable, monetisable forms, and this can exclude or obscure other important values, aspirations and qualities that are relevant to the work of social housing providers and the experiences of tenants.9

Finding 2: Market failure provides a starting point for intervention

Mainstream economic theory regards private sector markets, rather than direct government control, as the preferred method of efficiently allocating goods and services, but accepts that government intervention is necessary and appropriate in cases of obvious market failure. In conventional economic theory, market failure arises when circumstances prevent, distort or inhibit the efficient operation of markets. The four traditional forms of market failure comprise:  the provision of public or partly public (mixed or ‘merit’) goods: those which once provided,

are used by everyone regardless of market signals (for example, defence, the police or public roads), and those which will be systemically under-provided by the market, all else being equal (for example, education—or social housing)

 externalities: the costs and benefits of particular products that are not incorporated into the price of the product and therefore are excluded from the price signal (for example, pollution or immunisation—or the public health gains of decent housing)

 monopoly: where one provider controls the entire market and can therefore set prices irrespective of costs (for example, water or electricity infrastructure)

9 _{For more on the implications of cost-benefit analysis in a housing policy context, see Dodson, Denman et al.,}

 information asymmetries: where consumers lack the information they need to make a rational decision about a product (for example, because the cost of obtaining the information is too high or is perceived to be too high, or because the information is deliberately withheld) (Edwards 2007: 123–126).

The remedies for market failure vary depending on the context, but can include regulation, subsidies or the funding of services. The notion of ‘market failure’ itself, however, can constrain government action rather than promote it. As Kattel, Mazzucato and colleagues point out, inherent within conventional understandings of market failure is the idea of ‘government failure’. If the tacit assumption of policy is that markets are superior and governments inferior when it comes to the efficient allocation of goods and services, then it becomes credible and logical to believe that governments, in intervening in a case of market failure to promote certain social or welfare outcomes, may in fact ‘make things even worse than they would have been under conditions of market failure’ (2018: 4). The inevitable result is a preference for doing nothing— although inaction means a bad situation continues, action risks making it even worse (4–5). One of the effects of the neo-liberal turn in public policy has been to erode faith in the capacity and capability of government to act effectively and to effect positive change (Mazzucato 2016: 141). The notion of market failure rests on an assumption that the ideal or perfect market can and does exist, and as economists have pointed out, this is not the case. Although presented as one of the few exceptional cases in which governmental intervention is appropriate, in the ‘real’ world, imperfection in the quality, availability and accessibility of information is a far more likely phenomenon than not (see Kattel, Mazzucato et al. 2018: 5). Edwards (2007: 127–140) also argues that the economists’ version of ‘market failure’ is dissociated from reality, but for different reasons; she suggests that the conventional definition is too narrow and therefore misaligned with the deeply embedded cultural norms and values of Australian society. She calls for an expanded definition of ‘market failure’ that takes greater account of ideas about ‘quality of life’: the importance of meaningful social relationships and social trust, capacity for all people to make a meaningful contribution to others, whether they are in the workforce or not, and avoiding the social costs to individuals and communities arising from excessively long, inflexible or unpredictable working hours—arguing that ‘[h]ow we organise our economy lies at the heart of our quality of life’ (130). These are similar sentiments to those expressed in 1944 by the CHC, which argued that public housing provision would lead ‘the people to a fuller social life and a fuller exercise of the rights of the citizenship’ (67) (see Sec. 2.2.2).

Notwithstanding the critique of ‘market failure’ as an explanation of social problems or as the only reasonable justification for government action, this research did find consensus among policy makers, supported by the literature, on the existence of market failure in the Australian housing system. The private housing market is not meeting the housing needs of a growing proportion of Australian households in the absence of—and sometimes in spite of—subsidies and incentives from government. For interviewees, this failure provides ample justification for all three levels of Australian government to intervene in the housing market in order to ensure that the need for safe, affordable and appropriate shelter is met across all sections of society. Although this intervention could take a number of different forms, the provision of an appropriate stock of dwellings that can be made available at affordable rents is one of the most efficient and effective options available, given the stable nature of demand evident at the lower end of the market and the risk of exposure to housing market and wider economic volatility if stock needs to be purchased or acquired on an ‘as needed’ basis. This is essentially the function that is filled by the social housing system today—although it is questionable whether the supply or quality of the stock at present could be accurately defined as ‘appropriate’.

Alternative takes on market failure could expand the dimensions of an appropriate response to housing ‘market failure’. Following the arguments of proponents for ‘mission-oriented

into a socially preferred direction (see Mazzucato 2016; Kattel, Mazzucato et al. 2018), by taking on a more proactive role, to ‘shape markets and direct economic activity in socially desirable directions … to achieve publicly accepted outcomes’ (Kattel, Mazzucato et al. 2018, 6). Adopting a broader view of what constitutes ‘market failure’ (see Edwards 2007) would involve asking questions—What are the optimal levels of ‘consumption’ of this product for the community as a whole? What are the types and nature of the externalities, positive and

negative, that it produces?—and redefining the role, size and form of the social housing system accordingly.