Commonwealth Rent Assistance (CRA) is not reaching many of those who need it, with about 18 per cent of low-income private rental households in housing stress, yet not receiving the income supplement, a new AHURI report reveals.
The Demand-side assistance in Australia’s rental housing market: exploring reform options report modelled a number of possible cost-effective reforms to CRA, which could improve housing outcomes for low-income renters.
Lead researcher, Professor Rachel Ong ViforJ from Curtin University’s School of Economics, Finance and Property said one-third of low-income CRA households are still 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 at all.
“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 continued.
“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.”
In terms of adequacy, Professor ViforJ said while changing eligibility rules offered the greatest benefits, 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,” added ViforJ.
“Nevertheless, there could be constitutional ways of overcoming these constraints. However, care would need to be taken to ensure it retains its form as a cash payment to tenants, not landlords.”
These include using the external affairs power to affect the internationally recognised rights 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 government making grants to pay rent assistance to eligible people.
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 a year.
According to ViforJ, 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,” ViforJ warned.
“Previous AHURI research shows that the majority of new housing in Australia is concentrated in mid-to-high price brackets, which 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.”