According to a recent Australian Housing and Urban Research Institute report, one-third of low-income households exist in housing stress – defined as paying more than 30 per cent of their income in rent.
Undertaken by academics from Curtin University and UNSW Sydney, the research suggested better-targeted rent assistance would not only improve housing affordability for low-income renters but also generate cost savings.
Curtin University Professor of Economics and Researcher Rachel Ong ViforJ said the primary form of rent assistance for private renters – Commonwealth Rent Assistance (CRA) – was in drastic need of reform.
“CRA is inadequate as a form of rental assistance because it has not kept pace with rent increases over time,” she said. “Our research found that one-third of low-income CRA households remain in rental housing stress even if all their CRA is put towards rent.”
The other predominant issue is CRA is not well targeted to those who need it, according to Professor ViforJ.
“Around one-fifth, or 240,000, low-income private renter households are in housing stress but do not receive CRA,” she said. “Another 330,000 low-income private renter households are not in housing stress, yet they receive CRA.”
The report, Demand-side assistance in Australia’s rental housing market: exploring reform options, proposed various reforms to address the issue and found updating the CRA eligibility criteria to reflect those in rental housing stress generated the best outcomes.
While this reform would be the most beneficial in terms of adequacy, targeting and cost savings, Professor ViforJ said it came with constitutional complications.
“Currently the Australian Government is constitutionally limited to only paying CRA as a supplement to people who receive other social security benefits such as JobSeeker or the Age Pension,” she said. “I think we should revisit the constitution to find a way to implement reforms that better align CRA eligibility with housing need.
“This would make CRA more well targeted at those who need it and generate cost savings for the government to the tune of $1.2 billion per year – the benefits are significant.”
Ray White Whiteman & Associates Director David Whiteman agreed with both the need to address the issue and the CRA eligibility reform being the most effective proposed.
“Certainly, there are lots of gaps and the most vulnerable in society can sometimes get lost in the system,” he said. “Your rent should never go above 30 per cent of your take home. I think the scheme where anyone paying above that gets looked after is probably the fairest or most efficient way of addressing those people in the climate who need it most.”
Mr Whiteman believed what would be most effective is a multi-disciplinary approach to support people before they ever found themselves in housing stress.
“Like education and helping people getting trades – giving people some financial literacy, so how to actually manage your money once you’ve got it,” he said.
Other reforms suggested by the research included a 30 per cent increase in the CRA maximum rate, which 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.
“This would reflect a much-needed increase in CRA for low-income renters. CRA maximum rates simply have not kept pace with rent increases over time,” Professor ViforJ said, although conceded one of the challenges with such a reform was keeping the money from simply being captured by higher rents.
“This seems to be a problem that is restricted to low-income suburbs, where developers are slow to increase supply in response to an increase in demand for housing,” she said. “Hence, the government should introduce incentives to promote supply of housing in low-income areas.
“When there’s plentiful supply of housing in a suburb, landlords are less likely to increase rents, as they would not want to lose their tenant to another landlord.”
While the research focused on rent assistance for private renters, Professor ViforJ said CRA reform alone was not sufficient.
“It needs to be part of a broader reform package that looks at increasing the supply of social housing,” she said.
“There are currently around 150,000 households on the public housing wait list nationally.
“These households would find it very difficult to compete in the private rental market and many would be at risk of homelessness as they continue to wait in long queues for access to public housing.”