WA housing department in $235m shortfall

Treasurer Troy Buswell is considering an overhaul of the Department of Housing and Works after the agency revealed it will have a shortfall of $235 million this financial year.

Mr Buswell, who is also the Housing and Works Minister, said he was reviewing options for an overhaul of the funding arrangements and functions of the agency.

The shortfall stems from the slump in the state's property market this year which has seen the department's revenue fall by an estimated $235 million, more than half the budget itself for fiscal 2009, Mr Buswell said.

The department warned that if the shortfall was not met, the department may have to put its land acquisitions and development activities on hold, and suspend some public housing construction programs.

In addition, the department said it may also have to scale back the special-group share equity schemes that provided assistance to first homebuyers such as indigenous and disabled applicants.

Mr Buswell said he had ordered the department to work with Treasury to analyse the situation and evaluate options.

Below is the announcement:

Treasurer and Housing and Works Minister Troy Buswell is reviewing options for an overhaul of the funding arrangements and functions of the Department of Housing and Works (DHW).

The move is in response to his discovery that this important State agency responsible for public housing misjudged its commercial income projections and is running out of money for the second year in succession.

Mr Buswell launched a scathing criticism of the Carpenter Labor Government for doing nothing about putting the agency on a proper footing and then standing by as its financial outlook worsened.

Unlike most government departments which are financed under the annual State Budget, DHW is self-funded through sales of land and property with the proceeds reinvested in public housing and further land development.

But the slump in the Western Australian property market this year has seen the department's sales revenue fall, leaving an estimated shortfall of $235million this financial year, more than half the budget it set itself for 2008-09, which the former Government endorsed less than six months ago.

In revealing its plight to the new Treasurer, the department warned that unless the Government made up the missing $235million it might, for example, have to put its land acquisition and development activities on hold, suspend some public housing construction programs not yet contracted and scale back the special-group shared equity schemes providing assistance to first homebuyers such as indigenous and disabled applicants.

The Minister expressed his alarm and concern at the situation and condemned the previous government's mismanagement and lack of oversight of the department.

"This is a black hole in the State's finances of serious proportions, which has to be laid at the feet of the Carpenter Government, and in particular the former Treasurer
Eric Ripper and Housing Minister Michelle Roberts," he said.

"That the department's sales and revenue forecasts were so wide of the mark is a concern in itself, but at the end of the day the responsibility for its governance and financial soundness rested fairly and squarely with Labor's ministers at the time."

Mr Buswell said the revelation of the $235million black hole came at a time when housing affordability was a major issue for the people of WA of whom more than 16,000 were still on the waiting list for public housing.

"I am deeply concerned that the current system is struggling to meet the demand for social housing. The time has come therefore for some hard decisions to be made about the structure, the practices and the objectives of the housing authority," he said.

The Minister said he had instructed DHW to work with Treasury to fully analyse the situation and evaluate the Government's options, which might include:

- modifications to the department's debt arrangements
- measures to improve its accountabilities and financial transparency
- a recasting of the public housing program, possibly with greater private sector and not-for-profit involvement
- changes to ensure that DHW's housing and land development objectives, if they are to continue, are self-sustaining

Mr Buswell said the department had a track record of 'land banking' when good times in the property sector generated a surplus for the agency, but then running to the Government for financial rescue when it got things wrong.

"This situation is not good enough and must change," he said.