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Better targeted rent assistance needed to help low-income tenants

Media release

Commonwealth Rent Assistance (CRA) is not reaching many of those who need it, with about 240,000 or 18 per cent of low-income private rental households in housing stress but not receiving the income supplement, new AHURI research has revealed.

The research, ‘Demand-side assistance in Australia’s rental housing market: exploring reform options’, was undertaken for AHURI by researchers from Curtin University and UNSW Sydney and modelled a number of possible cost-effective reforms to CRA that could improve housing outcomes for low income renters.

Lead researcher Professor Rachel Ong ViforJ from Curtin’s School of Economics, Finance and Property said one-third of low-income CRA households remained in rental housing stress (paying more than 30 per cent of income in rent) even if all their CRA income was put towards rent, while about one-fifth of low-income private rental households didn’t receive it despite being in housing stress.

“The research found that changing the eligibility criteria to reflect housing need, defined as low-income private renters paying rents exceeding 30 per cent of their income, produced the best outcomes,” Professor ViforJ said.

“This reform would mean it is best targeted at those who need it most, reducing the number of low-income private rental households in housing stress by approximately 370,000, including some currently ineligible for CRA.

“While some 240,000 households would become eligible due to their housing need, 330,000 would lose their CRA entitlements as they are not in housing stress. This reform would generate annual cost savings of around $1.2 billion, while low-income private renters in Melbourne and Sydney would make up more than half of the beneficiaries.”

Professor ViforJ said while changing eligibility rules offered the greatest benefits in terms of adequacy, better targeting and cost savings, there would be constitutional complications in implementing the reform.

“The Australian Government is constitutionally limited to only paying CRA as a supplement to people who receive certain other social security benefits such as JobSeeker or the Age Pension,” Professor ViforJ said.

“Nevertheless, there could be constitutional ways of overcoming these constraints, such as using the external affairs power to effect the internationally recognised right to housing; expanding the Australian Government’s constitutional powers to make provision for housing benefits; or reforming CRA as a Commonwealth-State and Territory program, with the Australian Government making grants to state and territory governments to pay rent assistance to eligible persons.

“However care would need to be taken to ensure it retains its form as a cash payment to tenants, not landlords.”

The research also found that a 30 per cent increase in the CRA maximum rate would move about 340,000 or 40 per cent of low-income private rental households out of housing stress at a cost of $1 billion per year.

Professor ViforJ said this would reflect a much-needed increase in CRA for low-income renters as maximum rates simply had not kept pace with rent increases over time.

“However, the research found that in some market contexts – especially severely disadvantaged areas – as much as one-third of increases in CRA maximum rates could be captured by landlords in higher rents,” Professor ViforJ said.

“Previous AHURI research shows that the majority of new housing in Australia is concentrated in mid-to-high price brackets. These rent increases affect all tenants in disadvantaged neighbourhoods, including CRA-ineligible low-income workers.

“Policies that increase the flow of new housing supply in low-value market segments would be important to counteract this effect.”

The report can be downloaded from the AHURI website at http://www.ahuri.edu.au/research/final-reports/342.