Spotlight - Understanding housing classifications in ABS Building Statistics

One complexity in understanding the changing landscape in the type of housing built in Australia is the interchangeable use of terms like ‘public housing’, ‘social housing’, ‘affordable housing’, and ‘community housing’. Understanding housing statistics published by the ABS requires an understanding of these terms and where they appear within official statistics. 

This article outlines how the ABS classifies residential building approvals and activity into different sectors[1] and how those sectors relate to the concepts of affordable, social and community housing. The focus is on Building Approvals and Building Activity publications, jointly referred to here as "ABS building statistics". Both of these publications use the same classifications which apply to residential and non-residential buildings, however the emphasis in this article is on residential buildings. Examples of how a theoretical building job would be classified are provided to help users understand the ABS sector classifications within these publications. A specific area addressed is the distinction between government ownership and government funding for housing.

There are broad terms used interchangeably in housing commentary that describe different types of non-market housing (defined below). Most attempts to separate different types of non-market housing[2] rely on characteristics of the intended household or how a housing project is funded.

For the purposes of this article, non-market housing is defined as the broad term covering the following definitions, which themselves are a combination of definitions from the Australian Housing and Urban Research Institute (AHURI) and the Australian Institute of Health and Welfare (AIHW):

• Social housing: government subsidised short and long-term rental housing, mainly reserved for people experiencing certain circumstances, such as those with low incomes or who have experienced homelessness, family violence, or have other complex needs. Social housing is further split into: 
  • Public housing: housing owned and managed by State and Territory Governments.
  • Community housing: housing managed (and often owned) by not-for-profit organisations, usually reserved for low-income individuals or families.
  • State owned and managed Indigenous housing: housing administered/managed by governments (Federal, State/Territory, Local) available to households with at least one member who identifies as being of Aboriginal and/or Torres Strait Islander origin.
  • Indigenous community housing: housing owned or managed by First Nations communities.
• Affordable housing: can mean different things based on the context, but often refers to housing with a rent/price intentionally lower than the prevailing local market rate.

A challenge with these definitions and their use is the implicit overlap between them. A dwelling owned by a community housing provider could also be described as affordable. The above definitions split non-market housing based on characteristics of the owner and characteristics of the intended user. While the terms may be useful in discussing the composition of new housing in Australia to support specific groups of people in need, they don't align with the public vs private classification used in Building Approvals and Building Activity. Sector classifications in these publications rely solely on the owner of a building project upon completion, and not characteristics of the intended household.

The terms defined earlier are broadly described as housing provided to eligible households or how rents/prices are controlled to ensure accessibility by certain cohorts. The public/private classification used by ABS building statistics are based on the Standard Economic Sector Classifications of Australia (SESCA 2021). SESCA is a suite of economic sector classifications used by the ABS in the production of macro-economic statistics. Under SESCA 2021, the Private/Public classification provides the standard for dividing resident units into either the private or public sector, based on government control:

1. Public (government units and units controlled by government) and,
2. Private (all other units).

As it relates to new building construction, control of a building is assessed at the building approval stage by determining the intended owner of a housing project upon completion. Public housing is any housing that is directly owned and operated by the government, and accordingly appears in public sector estimates. In contrast, housing developed and owned by a Community Housing Provider (CHP) is classified as private sector housing, because the CHP is not controlled by government. 

It isn't possible to produce estimates of community or affordable housing in ABS building statistics based purely on the owner of a housing project, because developers can engage in a combination of market housing and non-market housing. For example, a CHP predominately builds community housing, but they may also intentionally engage in some amount of market housing to help fund or de-risk their community housing projects. This is why ABS building statistics only publish outputs using a private/public sector split, rather than also producing outputs for community or affordable housing. This presents a challenge when discussing or commenting on non-market housing and describing it as a sub-sector of the private sector. 

This also means that ABS building statistics cannot be analysed to understand changes in government funding over time. Because SESCA is a classification of units, concepts such as housing intention are not considered by Building Approvals/Activity. Similarly, concepts such as housing tenure that are used in the Census are not considered by Building Approvals/Activity.

The following table outlines how the various types of non-market housing may relate to the ABS building statistics sector classifications: 

As highlighted above, affordable or social housing can appear within either the public or private sector outputs depending on the owner, so there doesn't exist an obvious one-to-one relationship with these terms and a specific ABS sector classification. Accordingly, growth or decline in public sector estimates cannot be used as a proxy for growth or decline in non-market housing. In some commentary, definitions of affordable housing make the clear distinction that it must be private sector, but the term can also be used in a broad context without such a distinction. This complicates analysing ABS building statistics in their proper context.

Furthermore, some of the sub-categories under Social housing are classified in the public sector while others are classified as private sector. This means that Building Approvals and Building Activity cannot be used to analyse changes in capacity of social and affordable housing. 

To understand how the these classifications work in practice, the following examples outline how different projects may be classified in ABS building statistics, despite similar amounts of Government funding invested.

Example 1:

• A state government invests in an urban renewal project that will build housing through a process managed by the state urban development agency, which is classified as a Public Non-Financial Corporation (PNFC, defined in SESCA as Public Sector). The urban development agency doesn’t undertake the construction work, but they are the owners of the project who produce inventory for sale. 
• The intention (known when the building approval is obtained) is for the houses to transfer in ownership at the time of completion from the urban development agency to a state Housing Trust who will operate the houses. The state trust is also classified as a PNFC unit.
• All houses construction, and the value invested by the urban development agency, is classified to the public sector within Building Approvals and Building Activity.
• Within Government Finance Statistics (GFS) and the Australia System of National Accounts (ASNA), the housing assets are recorded as the state Housing Trust’s Gross Fixed Capital Formation.

Example 2: 

• The Government makes funding available to CHPs from an investment fund (a General Government unit) which provides financial support for housing projects.
• A CHP develops a proposal to build housing (locate a site, produce a housing development plan, identify the funding gap) and applies to secure financial support. The CHP is not controlled by government (and therefore part of the private sector) and is classified as a Non-Profit Institution Serving Households.
• If approved, the CHP uses the funding to build the housing.
• At the time of completion, the houses will be owned and operated by the CHP. All houses built are classified to the private sector within Building Approvals and Building Activity.

Correct allocation of building projects between the private and public sector is essential for correct classification within the Australian System of National Accounts and Government Finance Statistics. The building approvals data collected by the ABS enables an accurate allocation of projects into these sectors for the purposes of Building Approvals and Building Activity publications, but is insufficient to provide a holistic picture of total Government funding for housing. 

Trends in the public sector outputs in Building Approvals and Building Activity can be reflective of changes in Government investment in and/or ownership of housing. The classifications and the composition of non-market housing may obscure this view. Analysts should use both the public sector building statistics alongside other estimates of public spending on housing to get the full picture of Government investment in housing.

1. In this article, sector refers to public and private sector classification as per SESCA 2021.
2. For the purposes of this article, non-market housing is defined as a catch all term. The article intentionally does not define non-market housing in relation to market vs non-market producers, terms that are well defined in SESCA 2021.