Social investment – which uses an actuarial approach to determine the long-term liability of various social problems to then target spending to reduce that cost – is a central piece in the government’s goal to achieve more from a smaller public service. Yesterday, MSD released its first valuation of the social housing system, where it found that the lifetime housing cost of adults in social housing or on the social housing register was $16.4 billion, with roughly 85 percent of the cost relating to future income-related rent subsidy (IRRS) payments.
The SIU test case monitored about 22,000 people who applied for social housing between 2005 and 2006, 10,600 of whom were allocated a house. The research showed that those allocated a house spent less time in jail, saving an average of $1,244.20 per household or $13 million less spent out of the Corrections budget overall.
A similar number of households in both groups interacted with Corrections, with close numbers of community service and home detention sentences, but the number of remand and prison sentences was substantially smaller for the housed group.
Children who lived in social housing spent more time in education, leading to a 6 percent higher spend from the Education budget compared to the other group. Social housing tenants were more likely to access benefits, meaning a 4 percent increase in welfare spend, and earned less, leading to a $6 million reduction in tax paid on income.
“This could suggest social housing support presents a disincentive towards working, as it may result in a loss of advantages,” the SIU report says. “However, establishing there is a causal relationship would require further research.”
The report’s authors stressed that the test case highlights “the limitations of measuring social outcomes through a fiscal lens only and over a short period.”
“This is illustrated by the increased spend in education for social housing tenants,” the report says. “On a purely fiscal point, this has the effect of lowering the ROI. In reality, this may correspond to a better social outcome for children (better education resulting in a better employment rate), as well as a greater government revenue through taxes collected in the long-term.”
Overcoming this limitation would require going beyond a purely fiscal impact analysis, the report says, in order to “paint a far more accurate picture of the effective impact of social housing”. The Social Investment Analytical Layer (SIAL), created by SIU as part of this project, is there to “facilitate the monitoring of outcomes.”
Adams said it was important to apply a data-driven approach to decision making across all government agencies, saying she wants to make it a permanent way of making policy. The SIAL makes it faster and easier to get insights from data, and has already saved $1 million since its launch in May, she said.
The Social Investment Agency, which will launch on July 1, will be responsible for developing advice across social sector portfolios using data such as the SIU’s test case, Adams said.
“We can use the insights from this test case to calculate the fiscal return on investment for social housing and prove with hard data what we already intuitively know – that providing social housing helps New Zealanders to lead better lives.”
“We’re a government that wants fewer customers. Because the less people rely on government, the more independent they are,” Adams said. “We’ll do this, not through cutting public services, but by improving lives so people don’t need those services.”