tag:theconversation.com,2011:/us/topics/commonwealth-rent-assistance-75811/articlesCommonwealth Rent Assistance – The Conversation2023-08-17T06:26:00Ztag:theconversation.com,2011:article/2116962023-08-17T06:26:00Z2023-08-17T06:26:00ZNational Cabinet’s new housing plan could save renters billions<figure><img src="https://images.theconversation.com/files/543171/original/file-20230817-24-yzd7tc.png?ixlib=rb-1.1.0&rect=41%2C23%2C3952%2C2215&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Wednesday’s National Cabinet meeting set itself a huge task: to fix Australia’s rental crisis. Thankfully, given rents are rising at their fastest rate in decades, the plan it produced just might do the trick.</p>
<p>Prime Minister Anthony Albanese says it’s the most <a href="https://twitter.com/AlboMP/status/1691684990789230845">significant housing reform</a> in a generation. If the states and territories deliver on their commitments, this might become one of the rare occasions when such lofty rhetoric is justified. </p>
<p><a href="https://www.pm.gov.au/media/meeting-national-cabinet-working-together-deliver-better-housing-outcomes">The plan</a> has two key objectives: </p>
<ul>
<li><p>to remove constraints to building more homes in established suburbs</p></li>
<li><p>to give renters more rights </p></li>
</ul>
<p>As Grattan Institute has <a href="https://grattan.edu.au/report/housing-affordability-re-imagining-the-australian-dream/">long argued</a>, each is crucial. </p>
<h2>Rents 4% cheaper as a result of the plan</h2>
<p>The National Planning Reform Blueprint adds <a href="https://www.pm.gov.au/media/meeting-national-cabinet-working-together-deliver-better-housing-outcomes">200,000 homes</a> to the previous target of <a href="https://www.nationalhousingaccord.au/">1 million</a> extra homes over five years. </p>
<p>More importantly, that target is backed by $3.5 billion in incentives for states and territories to actually deliver the extra homes. </p>
<p>Most of that comes from the <a href="https://www.pm.gov.au/media/meeting-national-cabinet-working-together-deliver-better-housing-outcomes">New Home Bonus</a>, which will give states and territories $15,000 for every one of the extra 200,000 homes they deliver. </p>
<p>Grattan Institute calculations suggest those extra 200,000 homes, once all built, could reduce rents from what they otherwise would have been by 4%. </p>
<p>That’s a saving of $8 billion for renters over the first five years. </p>
<p>If those higher rates of construction are sustained for a full decade, rents could fall by 8%, saving renters $32 billion over those ten years. </p>
<h2>Rewards for states that fast-track developments</h2>
<p>A separate <a href="https://www.pm.gov.au/media/meeting-national-cabinet-working-together-deliver-better-housing-outcomes">Housing Support Program</a> will provide $500 million in competitive funding for state and local governments who get their act together on connecting services to new housing developments and fast-tracking planning reforms.</p>
<p>The Grattan Institute has <a href="https://grattan.edu.au/report/housing-affordability-re-imagining-the-australian-dream/">long called for</a> such meaningful incentives.</p>
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<span class="caption">Not near me. Homeowners don’t like apartment blocks.</span>
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<p>It is our state and local governments that restrict medium- and high-density developments, largely to appease existing residents in established suburbs. </p>
<p>The specific barriers vary from state to state, but the effect is the same: fewer houses where people most want to live.</p>
<p>Freeing up barriers is politically hard for state governments because many (vocal) residents don’t want more housing where they want to live. </p>
<p>Combined, the $3.5 billion in incentive payments will make it worth the states’ while to make tough choices by rewarding them for each extra home that’s eventually built.</p>
<h2>Better housing, as well as more housing</h2>
<p>Importantly, National Cabinet has also committed to rectifying problems in housing design and building certification to lift the quality of new builds, particularly apartments.</p>
<p>Public support for more density in existing suburbs will rise if residents know that what will get built will be <a href="https://grattan.edu.au/news/designing-better-suburbs/">good-quality housing</a> that results in more vibrant and liveable communities. </p>
<h2>Better security for renters</h2>
<p>The second part of the plan – better, and nationally consistent, rights for renters – is an important step towards delivering genuine security of tenure. </p>
<p>The archetypal renter is no longer a student with a few milk crates and a futon. </p>
<p>It is increasingly a young family that has to endure huge housing costs and the intermittent disruption of being evicted against its will.</p>
<p>Nearly a quarter of couples who started their family more than five years ago are still renting privately. As do more than half of Australia’s single parents. </p>
<p>But while renters have changed, Australia’s rental rules have not. Renting remains insecure: most tenancy agreements are for a single year, and in many states landlords retain extensive rights to end leases, including via no-grounds evictions. </p>
<p>The plans aim to ensure renters can be evicted only if there are genuinely reasonable grounds for eviction. </p>
<h2>Better behaviour by landlords</h2>
<p>The prime minister and premiers also want to combat what they call <a href="https://www.pm.gov.au/media/meeting-national-cabinet-working-together-deliver-better-housing-outcomes">retaliatory</a> rent increases and eviction notices, whereby landlords hit back at tenants who take reasonable action to enforce legal rights or complain about their tenancy.</p>
<p>These are important steps, but more will be required. For example, more needs to be done to encourage <a href="https://grattan.edu.au/news/super-funds-cant-solve-our-affordable-housing-problem/">institutional investors</a> to buy up more of the rental stock. They are better placed than “mum-and-dad” investors to offer security.</p>
<h2>More needed, but a good start</h2>
<p>There is <a href="https://grattan.edu.au/report/housing-affordability-re-imagining-the-australian-dream/">much more</a> that will have to be done to make housing more affordable. </p>
<p>The tax and means test rules that distort demand for housing will have to be reformed, Commonwealth Rent Assistance will have to be increased further, and the Senate will have to pass the Housing Australia Future Fund to guarantee a steady stream of funding for new social housing. </p>
<p>But this is an excellent start. What will be important will be that the states follow through and don’t try to use loopholes to get rewards for homes that would have been built anyway.</p>
<p>For its part, the Commonwealth will have to do all it can to ensure Australia gets the skilled workers that will be needed to build these extra houses, including by <a href="https://grattan.edu.au/report/australias-migration-opportunity-how-rethinking-skilled-migration-can-solve-some-of-our-biggest-problems/">streamlining</a> pathways to skilled migration.</p>
<p>Ultimately, the only thing that will really help is more about supply. Because when housing is plentiful, it’s more affordable. </p>
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<em>
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Read more:
<a href="https://theconversation.com/the-rent-crisis-is-set-to-spread-heres-the-case-for-doubling-rent-assistance-196810">The rent crisis is set to spread: here's the case for doubling rent assistance</a>
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<img src="https://counter.theconversation.com/content/211696/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute's board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities.</span></em></p><p class="fine-print"><em><span>Joey Moloney does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Grattan Institute calculations suggest that the 200,000 homes the state and territory leaders have agreed to build over five years will result in billions in savings for renters.Brendan Coates, Program Director, Economic Policy, Grattan InstituteJoey Moloney, Deputy Program Director, Economic Policy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2056432023-05-16T06:09:14Z2023-05-16T06:09:14Z4 ways to bring down rent and build homes faster than Labor’s $10 billion housing fund<p>Treasurer Jim Chalmers is the first in decades to declare war on what he calls the “<a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/budget-speech-2023-24">pain of rising rents</a>”.</p>
<p>His first budget, in October, and his second, this month, contained a suite of measures designed to stop rents going “<a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/budget-speech-2022-23">through the roof</a>”. By far the biggest of those – the blockbuster – was a A$10 billion <a href="https://ministers.treasury.gov.au/ministers/julie-collins-2022/media-releases/housing-australia-future-fund-draft-legislation">Housing Australia Future Fund</a> to finance social and affordable housing.</p>
<p>If you think the idea of building a fund rather than building houses sounds odd, you probably think the same way about the <a href="https://www.health.gov.au/our-work/medical-research-future-fund">Medical Research Future Fund</a>, the <a href="https://www.agriculture.gov.au/agriculture-land/farm-food-drought/drought/future-drought-fund">Future Drought Fund</a>, the <a href="https://nema.gov.au/disaster-ready-fund">Disaster Ready Fund</a> or the $250 billion <a href="https://www.futurefund.gov.au/">Future Fund</a> itself, which was set up to pay public service and defence pensions.</p>
<p>Those were all previous Coalition government ideas – the likes of which were satirised by ABC TV’s <a href="https://www.smh.com.au/politics/federal/tony-abbotts-hollowmen-moment-was-medical-research-fund-a-lastminute-distraction-20140603-39fl8.html">The Hollowmen</a> which in 2008 came up with the idea of a $150 billion <a href="https://www.youtube.com/watch?v=Ud8ZisH2IYI">National Perpetual Endowment Fund</a>, created for no particular purpose other than “to meet the future challenges of this nation”.</p>
<p>I can think of at least four things that would do more to restrain rents than Labor’s $10 billion fund – and one of them would do it a lot quicker.</p>
<h2>$10 billion, but off-budget and largely unspent</h2>
<p>The (political) genius of these sorts of funds is they make it look as if you are spending a lot, without the need to spend much at all.</p>
<p>The $10 billion (or whatever that goes into the fund) isn’t actually “spent” as far as the budget is concerned. It doesn’t come off the budget surplus, or add to the budget deficit, because it remains in the government’s hands.</p>
<p>The fund can be thought of as a fiction. The money stays in the government’s hands until some of it is spent, except that while in the government’s hands it is invested in the stock market and other places to try and earn a return. It doesn’t always work. During 2022 the usually successful Future Fund went <a href="https://www.futurefund.gov.au/news-room/Portfolio-update-to-31-December-2022">backwards</a>.</p>
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<figcaption><span class="caption">“Rear Vision”, The Hollowmen, ABC.</span></figcaption>
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<p>When Labor came up with the idea of the Housing Australia Future Fund in <a href="https://webarchive.nla.gov.au/awa/20211209130951/https://alp.org.au/policies/housing_future_fund">2021</a>, it looked a surer bet. Governments could borrow at “<a href="https://theconversation.com/the-compelling-case-for-a-future-fund-for-social-housing-172508">ultra-low interest rates</a>” and the returns on investments were good.</p>
<p>To “<a href="https://ministers.treasury.gov.au/ministers/julie-collins-2022/speeches/second-reading-speech-housing-australia-future-fund-bill-2023">protect the balance of the fund</a>”, the government has limited withdrawals to $500 million per year, meaning a less-grand-sounding commitment to spend up to $500 million a year would have achieved just as much.</p>
<p>Housing Minister Julie Collins’ counter to that criticism is to say that creating a fund – an “enduring promise” – will protect housing spending from the “whims of future governments”</p>
<p>And yet the legalisation says every piece of spending from the fund will require <a href="https://ministers.treasury.gov.au/ministers/julie-collins-2022/speeches/second-reading-speech-housing-australia-future-fund-bill-2023">formal government approval</a>.</p>
<p>Another reason for limiting the amount that can be spent each year (apart from protecting the balance of the fund) is that there are practical limits on how quickly homes can be built.</p>
<h2>Limits on how quickly new homes can be built</h2>
<p>A <a href="https://theconversation.com/building-more-houses-quickly-is-harder-than-it-looks-australia-hasnt-done-it-in-decades-170223">truly bizarre</a> and long-established fact of Australian home building is that it never gets done more quickly. If you went back to the 1990s, the 1980s or even the 1970s, you would find that the number of houses completed per quarter was roughly what it is today, between 22,000 and 29,000.</p>
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<p>The number of houses under construction varies wildly; at times it has been low, late last year it reached an all-time high. But the number of houses completed seems to chug along at the same rate regardless. All that commencing more builds does is push out construction times.</p>
<p>It’s the same for units, which the Bureau of Statistics classifies as “other residential”. The number being completed per quarter is no higher than it was a decade ago, but the number under construction has climbed much higher.</p>
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<p>All that funding more than a small number of extra builds per year would do is push construction costs higher and push out completion times.</p>
<p>The <a href="https://www.maxchandlermather.com/greens_stare_down_labor">Australian Greens</a> might well be right to oppose the artifice of a “fund,” but they are probably wrong to propose much more spending per year than the $500 million the government is promising and the 30,000 extra homes over five years it says it will deliver.</p>
<p>I can think of at least four things that would restrain rents more than the fund, one of which Chalmers has delivered in the budget, albeit in a small dose.</p>
<h2>1. Boost rent assistance</h2>
<p>The “largest increase in more than 30 years” in <a href="https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/speeches/budget-speech-2023-24">Commonwealth Rent Assistance</a> amounts to $16 per week. </p>
<p>It’ll help the 1.3 million concession card holders who receive it. But it is not much, and not much more in the future, because Chalmers has not acted on the recommendation of his economic inclusion advisory committee to increase it in line <a href="https://www.dss.gov.au/sites/default/files/documents/04_2023/interim-economic-inclusion-advisory-committee-2023-24-ieiac-report_2.pdf">with rents actually paid</a>, rather than the consumer price index.</p>
<p>Chalmers might well have been concerned that a bigger increase in rent assistance would have pushed up rents, but there’s a way of dealing with that.</p>
<h2>2. Limit rent increases</h2>
<p>Price control is anything but uncommon. In most states, increases in the prices we can be charged for electricity, gas and water are limited by regulation. In the Australian Capital Territory, <a href="https://www.acat.act.gov.au/case-types/rental-disputes/rent-increases">increases in rents</a> are limited by regulation.</p>
<p>The maximum permitted increase is <a href="https://www.acat.act.gov.au/case-types/rental-disputes/rent-increases">110%</a> of the most recent annual increase in Canberra rents reported to the Bureau of Statistics. In the year to March, Canberra rents climbed 5.54%, making the maximum permissible increase 6.1%.</p>
<p>It works well, and Canberra landlords don’t seem to have withdrawn from the market. Among Australia’s capitals, Canberra’s rental vacancy rate is <a href="https://www.domain.com.au/research/vacancy-rates-april-2023-1210395/">the highest</a>.</p>
<h2>3. Bribe states and councils to rezone land</h2>
<p>Another option is to provide <a href="https://www.theage.com.au/national/want-to-improve-housing-affordability-here-s-the-solution-20211019-p591dn.html#">incentive payments</a> to state and local governments that free up their planning systems and build more housing. </p>
<p>Conditional payments are not novel. The Commonwealth provided special payments to states that fell in line with its deregulation agenda for about a decade from the <a href="http://ncp.ncc.gov.au/docs/2005%20assessment.pdf">mid-1990s</a>.</p>
<h2>4. Restrict negative gearing to new builds</h2>
<p>Negative gearing and the concessional rate of capital gains tax that accompanies it drive Australians into becoming landlords. But if they buy existing homes to do it, they do no more than turn owner-occupied homes into rented homes. </p>
<p>Limiting negative gearing to newly-built homes – as Labor promised in <a href="https://webarchive.nla.gov.au/awa/20190513154843/http://pandora.nla.gov.au/pan/175559/20190514-0131/www.alp.org.au/policies/reforming-negative-gearing-and-capital-gains-tax-arrangements/index.html">2019</a> – would get them to fund new builds.</p>
<p>While it’s true that getting more Australians into affordable homes is anything but easy, some of what we need to do is straightforward. We can do better than a grand-sounding big-bucks fund.</p>
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<em>
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Read more:
<a href="https://theconversation.com/the-compelling-case-for-a-future-fund-for-social-housing-172508">The compelling case for a future fund for social housing</a>
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<img src="https://counter.theconversation.com/content/205643/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>We can do better than a grand-sounding big-bucks fund.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2035422023-04-11T05:50:36Z2023-04-11T05:50:36ZWhat made rents soar? It might have been COVID, and pairing off<figure><img src="https://images.theconversation.com/files/520187/original/file-20230411-16-4z7ae3.png?ixlib=rb-1.1.0&rect=5%2C533%2C3009%2C1575&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>So, you think you know why rents climbed.</p>
<p>You probably think was skyrocketing interest rates and a tsunami of migration.</p>
<p>It’s true that interest rates have jumped more over the past year than at any time on record, and it’s true that migration has roared back – in the six months to September 2022 (the latest month for which we’ve official figures) arrivals exceeded departures by <a href="https://www.abs.gov.au/statistics/people/population/national-state-and-territory-population/sep-2022">170,000</a>.</p>
<p>But here’s the thing. Advertised rents began climbing sharply in <a href="https://www.realestate.com.au/insights/where-rents-prices-are-really-skyrocketing-in-some-cases-by-600-a-week-more/">late 2021</a> – six months before the Reserve Bank began pushing up interest rates, and at a time <a href="https://theconversation.com/top-economists-expect-rba-to-hold-rates-low-in-2022-as-real-wages-fall-175054">when it was forecast not to</a>.</p>
<p>And “net migration” was <a href="https://www.abs.gov.au/statistics/people/population/national-state-and-territory-population/sep-2021">negative</a> back when rents were taking off – meaning the number of arrivals didn’t even match the number of departures.</p>
<h2>It’s supply and demand</h2>
<p>Something else made rents move.</p>
<p>As it happens, there’s no particular reason to think interest rates would have quickly affected rents even if they had been climbing. If higher rates force some landlords to sell, and they sell to other landlords, the number of properties for rent won’t change. If those landlords sell to owner occupiers who would otherwise rent, they cut both the number of rental properties and the number of renters.</p>
<p>What matters for rents, as for any price, is the demand for and the supply of the product being priced. More demand (more renters wanting properties) and the price climbs. More supply (more properties available for rent) and the price falls.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/1-billion-per-year-or-less-could-halve-rental-housing-stress-146397">$1 billion per year (or less) could halve rental housing stress</a>
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<p>On the face of it, neither demand nor supply was changing much during COVID as rents started climbing. Australia’s population was growing more slowly than at any time <a href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-04-05.html">in modern history</a>. And, as best as we can tell, the number of properties available for rent was climbing, <a href="https://www.abs.gov.au/statistics/industry/building-and-construction/building-activity-australia/latest-release">albeit weakly</a>.</p>
<p>What did change during COVID, according to the research department of the Reserve Bank, was the <a href="https://www.rba.gov.au/publications/bulletin/2023/mar/renters-rent-inflation-and-renter-stress.html">average number of people per household</a>.</p>
<p>The change doesn’t sound big – the average fell from a bit above 2.6 residents per household to a bit below 2.55 – but applied to millions of households it meant about <a href="https://www.rba.gov.au/speeches/2022/sp-ag-2022-05-25.html">140,000</a> more houses and apartments were needed than would have been.</p>
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<h2>Average household size (capital cities)</h2>
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<a href="https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=423&fit=crop&dpr=1 600w, https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=423&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=423&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=532&fit=crop&dpr=1 754w, https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=532&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/520162/original/file-20230411-16-x7c3sg.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=532&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Average number of persons usually resident in an occupied private dwelling, trend and actual.</span>
<span class="attribution"><a class="source" href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-04-05.html">RBA, ABS microdata</a></span>
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<p>The sudden change was awfully for hard for the building industry to respond to, especially when it was laid low by COVID.</p>
<p>Why did we suddenly want to live with fewer people?</p>
<p>The head of the Bank’s economic division, Luci Ellis, thinks it was COVID itself, and lockdowns. We suddenly became more precious about sharing space.</p>
<h2>‘Love the one you’re with’</h2>
<p>Ellis says proportion of Australians living in group houses declined and stayed low. Faced with the choice of living with a large number of housemates and just one other person, perhaps a romantic partner, a lot of renters left group houses and <a href="https://www.rba.gov.au/speeches/2022/sp-ag-2022-05-25.html">shacked up with each other</a>.</p>
<p>As she put it last year:</p>
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<p>On the question of who you would rather be locked down with, at least some Australians have voted with their removalists’ van, by moving out of their share house and in with their partner.</p>
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<p>There’s more to it of course, but where the supply and demand for anything are roughly in balance (rents had been increasing by <a href="https://theconversation.com/rent-crisis-average-rents-are-increasing-less-than-you-might-think-189154">less than 1% per year</a> in the four years before COVID, and fell in the first year of COVID) any sudden change in either supply or demand can move prices quickly.</p>
<h2>Advertised rents aren’t typical …</h2>
<p>Having said that, for most renters prices are still moving slowly. Advertised capital city rents are up <a href="https://www.realestate.com.au/insights/where-rents-prices-are-really-skyrocketing-in-some-cases-by-600-a-week-more/">13%</a> over the past year, and advertised regional rates up 9%. But average rents (the average of what all renters pay) are up only 4.8%. </p>
<p>The rents charged to ongoing tenants climb <a href="https://theconversation.com/rent-crisis-average-rents-are-increasing-less-than-you-might-think-189154">much more slowly</a> than the rents charged to new tenants, in part because landlords often like their tenants, and in part because for the first year renters are usually on fixed contracts.</p>
<p>But over time as renters move home, and landlords become less squeamish, more and more renters tend to pay the rents advertised. It makes the increase in advertised rents an unwelcome sign of what’s to come.</p>
<h2>… but they’re a sign of rents ahead</h2>
<p>And it might get worse. Reserve Bank Governor Philip Lowe says population growth is set to climb to <a href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-04-05.html">2%</a> – near the peak reached during the resources boom.</p>
<p>We won’t be able to build houses anything like that fast. Lowe says the last time Australia’s population surged it took about <a href="https://www.rba.gov.au/speeches/2023/sp-gov-2023-04-05.html">five years</a> for housing supply to fully respond to housing demand.</p>
<p>We’ve ways of dealing with it of course. One is to re-embrace group homes, another is to delay moving out of our partents’ homes, or to move back in.</p>
<p>But even if this does happen, Lowe says, with typical understatement, that rent inflation – ultra-low before COVID – is likely to stay “quite high” for some time.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/rent-crisis-average-rents-are-increasing-less-than-you-might-think-189154">Rent crisis? Average rents are increasing less than you might think</a>
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<img src="https://counter.theconversation.com/content/203542/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>During lockdowns renters ‘voted with removalists vans’, moving out of share houses and in with each other.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2009082023-03-22T19:42:37Z2023-03-22T19:42:37ZYes, the 1.5 million Australians getting rent assistance need an increase, but more public housing is the lasting fix for the crisis<figure><img src="https://images.theconversation.com/files/514083/original/file-20230307-20-qfgkut.jpg?ixlib=rb-1.1.0&rect=301%2C0%2C2933%2C1960&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Image: David Kelly</span>, <span class="license">Author provided</span></span></figcaption></figure><p>Australia is in the grip of a housing crisis, with low-income households hit hardest by <a href="https://www.abc.net.au/news/2023-03-11/australian-rental-vacancy-rates-lowest-since-before-pandemic/102079318">rising rents and falling vacancy rates</a>.</p>
<p>Social housing tenants were insulated from the <a href="https://www.corelogic.com.au/news-research/reports/quarterly-rental-review">10.2% jump in advertised private rental prices</a> in 2022. However, the proportion of people in social housing (an umbrella term covering <a href="https://www.ahuri.edu.au/research/brief/what-difference-between-social-housing-and-affordable-housing-and-why-do-they-matter">public and community housing</a>) fell by a fifth, from 4.6% to 3.7%, over the past decade. The Productivity Commission <a href="https://www.pc.gov.au/ongoing/report-on-government-services/2023/housing-and-homelessness/housing">reports</a> social housing waiting lists grew by over 17% in just three years, from 148,520 in 2019 to 174,624 in 2022. </p>
<p>The Albanese government has tabled a <a href="https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Economics/HousingPackageofBills">legislative package</a> to address the housing crisis. The flagship $10 billion <a href="https://www.smh.com.au/politics/federal/senate-crossbench-demanding-more-homes-to-pass-10b-housing-fund-20230222-p5cmrt.html">Housing Australia Future Fund</a> is intended to help pay for 30,000 social and affordable housing units to be built in its first five years. That’s far less than the <a href="https://www.ahuri.edu.au/research/brief/what-difference-between-social-housing-and-affordable-housing-and-why-do-they-matter">estimated 216,000-dwelling gap</a> between the level of need for social housing and the current supply.</p>
<p>In the lead-up to the federal budget in May, advocates are pushing for other measures to provide faster relief for low-income households in housing stress. At the forefront are <a href="https://everybodyshome.com.au/new-data-shows-that-its-time-to-fix-rent-assistance/">calls</a> to increase <a href="https://www.dss.gov.au/housing-support/programmes-services/commonwealth-rent-assistance">Commonwealth Rent Assistance</a> (CRA). Some academics have made the case for <a href="https://theconversation.com/the-rent-crisis-is-set-to-spread-heres-the-case-for-doubling-rent-assistance-196810">doubling rent assistance</a>, as have <a href="https://greens.org.au/housing">the Greens</a>.</p>
<p>However, primarily advocating for an increase in rent assistance risks prioritising short-term and partial relief over much-needed systemic change in how Australia delivers affordable housing. Social housing is a more cost-effective and lasting way of ensuring low-income households have affordable and secure housing.</p>
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<em>
<strong>
Read more:
<a href="https://theconversation.com/the-rent-crisis-is-set-to-spread-heres-the-case-for-doubling-rent-assistance-196810">The rent crisis is set to spread: here's the case for doubling rent assistance</a>
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<h2>Subsidies reflect state shift away from providing housing</h2>
<p>The Commonwealth provides financial assistance to eligible individuals or families in private rentals or community housing (where rents are generally <a href="https://www.ahuri.edu.au/research/brief/what-difference-between-social-housing-and-affordable-housing-and-why-do-they-matter">set below 30% of income</a>). The payment is meant to help people on low to moderate incomes meet the cost of renting a home in the private market.</p>
<p>To be <a href="https://www.servicesaustralia.gov.au/who-can-get-rent-assistance?context=22206">eligible for the program</a>, an individual or family must be receiving a qualifying social security payment and paying rent to a private landlord or community housing provider. The amount of rent assistance <a href="https://www.servicesaustralia.gov.au/how-much-rent-assistance-you-can-get?context=22206">depends on</a> their income, rent and household circumstances.</p>
<p>The program plays a similar role to rental assistance overseas. These programs include the <a href="https://www.gov.uk/housing-benefit/what-youll-get">Housing Benefit in the United Kingdom</a>, the <a href="https://www.gov.ie/en/service/fb3b13-rent-supplement/">Rent Supplement in Ireland</a> and the <a href="https://www.caf.fr/allocataires/aides-et-demarches/droits-et-prestations/logement/les-aides-personnelles-au-logement">Housing Allowance in France</a>. All provide assistance directly to people on low incomes in private rental housing. <a href="https://www.hud.gov/programdescription/cert8">Section 8 in the United States</a> and the <a href="https://www.canada.ca/en/services/benefits/housing.html">Housing Benefit in Canada</a> differ in paying a portion of low-income households’ rent directly to landlords.</p>
<p>These programs are part of a sustained trend away from governments directly providing housing and towards subsidising market participation.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-market-has-failed-to-give-australians-affordable-housing-so-dont-expect-it-to-solve-the-crisis-192177">The market has failed to give Australians affordable housing, so don't expect it to solve the crisis</a>
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<h2>Can increasing rent assistance solve housing insecurity?</h2>
<p>Commonwealth Rent Assistance cost the government <a href="https://www.pc.gov.au/ongoing/report-on-government-services/2023/housing-and-homelessness/rogs-2023-partg-overview-and-sections.pdf">about A$4.9 billion</a> in 2021–22. Since eligibility was broadened in 1985, the amount has increased from <a href="https://nla.gov.au/nla.obj-1665769466/view?partId=nla.obj-1671556748#page/n38/mode/1up">$250 million a year, paid to roughly 500,000 people</a>, to nearly $5 billion paid to roughly 1.5 million people today.</p>
<p>By comparison, the National Housing and Homelessness Agreement provides <a href="https://www.pc.gov.au/ongoing/report-on-government-services/2023/housing-and-homelessness">$1.7 billion</a> to the state housing authorities and community housing organisations that provided <a href="https://www.pc.gov.au/ongoing/report-on-government-services/2023/housing-and-homelessness/housing">439,386 tenancies across Australia</a> in 2022. </p>
<p>Despite rent assistance increasing over time, <a href="https://www.pc.gov.au/ongoing/report-on-government-services/2023/housing-and-homelessness">43.9% of recipients</a> are paying more than 30% of their income in rent – the benchmark for <a href="https://www.aihw.gov.au/reports/australias-welfare/housing-affordability">housing stress</a>. So, while government CRA spending is similar to what it spends on social housing on a per-dwelling basis, rent assistance is not as effective at ensuring low-income households have access to affordable and secure housing. This indicates a need to fix the structural problems that are worsening the housing crisis.</p>
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<p>Australia’s rental housing system has issues that increases in rent assistance cannot fix. Most CRA recipients rent in the tightening private market. With so few vacancies and rents soaring, finding a new private rental is <a href="https://www.anglicare.asn.au/publications/rental-affordability-snapshot-2022/">near-impossible</a> for low-income households. </p>
<p>Adding to their difficulties are tenancy laws that fail to offer long-term tenant security. Some states and territories have ended “no grounds” or “no fault” evictions. Even so, renters can still face housing uncertainty <a href="https://www.tenants.org.au/blog/end-fixed-term-evictions-are-unfair-no-grounds-evictions-part-2">when a lease ends</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/how-5-key-tenancy-reforms-are-affecting-renters-and-landlords-around-australia-187779">How 5 key tenancy reforms are affecting renters and landlords around Australia</a>
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<p>Issues with housing quality in lower-cost private rentals are also widespread. In a recent <a href="https://www.acoss.org.au/media-releases/?media_release=new-report-shows-that-action-is-needed-to-protect-those-on-the-lowest-incomes-from-summer-heat">ACOSS survey</a>, 89% of Centrelink recipients said they couldn’t keep their homes cool in summer and sometimes or always felt unwell as a result. </p>
<p>Renters also often fear eviction or rent increases in response to asking for repairs. As a result, <a href="https://www.aihw.gov.au/reports/australias-welfare/housing-affordability">51% live in homes in need of repairs</a>. </p>
<p>Rent assistance also does little to reduce the <a href="https://www.ahuri.edu.au/sites/default/files/migration/documents/AHURI_Research_Paper_Spatial-disadvantage-why-is-Australia-different.pdf">concentration of disadvantage</a> in certain areas, as shown below. Lower-income households are increasingly pushed to seek housing in cheaper areas, which have poorer access to infrastructure, services and amenities.</p>
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<p><iframe id="tc-infographic-821" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/821/48c79a3868b377b7c935aa6918cb064b12c58703/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
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<h2>Lasting solution is to rebuild public housing stock</h2>
<p>A 2020 Australian Housing and Urban Research Institute (AHURI) <a href="https://www.ahuri.edu.au/sites/default/files/migration/documents/Executive-Summary-FR342-Demand-side-assistance-in-Australias-rental-housing-market-exploring-reform-option.pdf">study</a> modelled the effects of increasing the maximum rate of Commonwealth Rent Assistance by 30%. It found this would “improve affordability outcomes” for 623,800 private renters, but at a cost of $1 billion to the federal budget. </p>
<p>No doubt a supplementary housing payment akin to rent assistance will be a useful interim measure. Expanding eligibility and a higher rate would both help struggling households. </p>
<p>However, this should be considered a temporary step towards easing housing stress. It needs to be implemented alongside long-term measures that tackle the root causes of the housing crisis. The best systemic solution is a sustained reinvestment in public housing on a scale that matches the hundreds of thousands who need it.</p><img src="https://counter.theconversation.com/content/200908/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Liam Davies receives funding from the Australian Housing and Urban Research Institute. He is a member of the Planning Institute of Australia.</span></em></p><p class="fine-print"><em><span>Alistair Sisson has received funding from the Australian Council of Social Services, Shelter NSW, QShelter, National Shelter, Mission Australia and Australian Housing and Urban Research Institute. He is a member of Shelter NSW. </span></em></p><p class="fine-print"><em><span>David Kelly receives funding from the Australian Research Council and the Australian Housing and Urban Research Institute. </span></em></p><p class="fine-print"><em><span>Priya Kunjan receives funding from the Australian Research Council. They are a member of the Antipoverty Centre. </span></em></p>Rent assistance can ease rental stress, but it won’t help low-income earners find secure and affordable housing when it’s in such short supply, nor stop disadvantage being concentrated in some areas.Liam Davies, PhD Candidate, Centre for Urban Research, RMIT UniversityAlistair Sisson, Macquarie University Research Fellow, School of Social Sciences, Macquarie UniversityDavid Kelly, Vice Chancellor's Postdoctoral Fellow, RMIT UniversityPriya Kunjan, Postdoctoral Research Fellow, Centre for Urban Research, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1968102023-01-10T19:05:47Z2023-01-10T19:05:47ZThe rent crisis is set to spread: here’s the case for doubling rent assistance<figure><img src="https://images.theconversation.com/files/503744/original/file-20230110-19-dlhjkp.png?ixlib=rb-1.1.0&rect=137%2C323%2C3742%2C1868&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>For many Australians, the rent crisis is just starting. Advertised rents have been soaring, but mainly for new rentals – so-called “asking rents”.</p>
<p>The broadest measure of rents actually paid – the rents on the 480,000 or so capital city properties the Bureau of Statistics uses to calculate the consumer price index – has climbed only modestly, increasing 3.5% in the year to October.</p>
<p>Rent cuts during the first year of COVID mean the Bureau’s measure of capital city rents is just 2.2% above where it was in February 2020, ahead of the COVID lockdowns.</p>
<p>But advertised rents are climbing steeply. According to property consultants SQM Research, they are an extraordinary 35% higher than in February 2020. </p>
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<p><strong>Asking rents versus consumer price index rents</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=262&fit=crop&dpr=1 600w, https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=262&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=262&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=329&fit=crop&dpr=1 754w, https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=329&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/503748/original/file-20230110-24-uk8xsl.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=329&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Jan/Feb 2020 = 100.</span>
<span class="attribution"><a class="source" href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">Calculated from SQM Research and ABS CPI</a></span>
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<p>Part of the reason for the difference in the two measures is that rents have been climbing most strongly away from the cities, and the Bureau’s consumer price index only incorporates capital city prices.</p>
<p>But probably more important is that newly-advertised rents are only paid by a small proportion of renters. </p>
<p>Most renters are likely to be paying rents set some time ago when the property was last advertised, or regular increases in accordance with a schedule they have become used to. Landlords tend to save the big increases for new tenants.</p>
<h2>Average rents so far slow to move</h2>
<p>For capital city tenants in total, real rents (which are rents adjusted for the rate of inflation) remain lower than they were in 2020, and also lower than they were in 2010, because other prices have increased faster.</p>
<p>But the changes in advertised rents suggest substantial increases in overall rents are coming. </p>
<p>When this happens it will place severe pressure on the living standards of the most vulnerable. What can we do about this?</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/rent-crisis-average-rents-are-increasing-less-than-you-might-think-189154">Rent crisis? Average rents are increasing less than you might think</a>
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<p>In the long run, the best solution is to provide more dwellings. A wide gamut of policies come into play, from public investment in housing to land use controls to improvements in transport. But they take a long while to work.</p>
<p>More immediately it might help to restrict foreign arrivals, at least for while, but this would hurt Australia’s education and tourism industries. </p>
<p>The simplest short-term response is to financially support renters. </p>
<h2>Rent Assistance is in place, but too low</h2>
<p><a href="https://www.servicesaustralia.gov.au/who-can-get-rent-assistance?context=22206">Commonwealth Rent Assistance</a> is already available to Australians on pensions and benefits including JobSeeker, the Family Tax Benefit and Parenting Payment.</p>
<p>But it is only modest. It amounts to 75% of the rent paid between two thresholds, both of which are low compared to actual rents. </p>
<p>For people living alone, the upper threshold is A$169 per week, for a couple with two dependent children it is <a href="https://www.servicesaustralia.gov.au/how-much-rent-assistance-you-can-get?context=22206">$250</a> per week. </p>
<p>The maximum available to a person living alone is $75.80 per week, or about $10 a day. The maximum available to a couple with two dependent children is $89.20 per week – about $13 per day.</p>
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<p>
<em>
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Read more:
<a href="https://theconversation.com/renters-spend-10-times-as-much-on-housing-as-petrol-wheres-their-relief-180702">Renters spend 10 times as much on housing as petrol. Where's their relief?</a>
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<p>The 2021 Census provides an indication of how far the rent thresholds have fallen below rents paid. It found the median rent for a one-bedroom home in Sydney was $451 per week. Only one quarter of such dwellings rented for $379 or less. </p>
<p>In other regions the rents were lower, but still well above assistance thresholds.</p>
<p>Research I conducted with Trish Hill for the <a href="https://povertyandinequality.acoss.org.au/income-support-since-2000/">Australian Council of Social Service</a> found the $10 per day and $13 per day available to singles and families does go a little way towards closing the large gap between JobSeeker and the poverty line, but there’s ample scope to lift it to something nearer the rents actually paid.</p>
<p>The 2009 <a href="https://treasury.gov.au/review/the-australias-future-tax-system-review/final-report">Henry Tax Review</a> recommended linking the upper rent threshold to the 25th percentile of actual rents for one and two-bedroom dwellings in capital cities (the rent level that 75% of rentals exceeded).</p>
<h2>Rent assistance could double</h2>
<p>My calculations suggest the threshold proposed by the Henry Review would now be $354 per week – more than twice the current upper threshold for singles. </p>
<p>If the rest of the payment formula remained unchanged, this would boost the maximum payment 2.8 times to around $215 per week for singles – enough to make a big dent in rent payments. And it would automatically adjust in line with subsequent rent increases.</p>
<p>Would such an increase be simply redirected into landlords’ pockets? </p>
<p>The Henry Review argued that wouldn’t happen much, and to the extent it did, it would encourage more investment. </p>
<h2>More assistance shouldn’t push up rents</h2>
<p>For people who are at the maximum payment threshold, an increase in rent assistance would be just the same as any other increase in income – it would give them more to spend on a wide array of things rather than only housing. </p>
<p>One way to minimise upward pressure on rents and help those in the highest-rent locations more would be to vary the threshold by region. The Henry review didn’t recommend this, arguing that its recommended maximum rate of payment would be high enough in all locations. </p>
<p>But if any increase offered is not as generous as that proposed by Henry, varying the amount by region could distribute what is offered more fairly.</p>
<h2>In time, we will need to offer rent assistance more widely</h2>
<p>What I have proposed isn’t perfect. Rent Assistance is generally paid only to Australians on benefits, meaning many vulnerable renters could miss out.</p>
<p>Even though it is available to some families receiving Family Tax Benefit A, the tight rules governing that benefit mean only about 154,000 families on it get rent assistance.</p>
<p>The likely rent increases in the pipeline will create pressure to expand rent assistance to a wider range of families in financial stress.</p><img src="https://counter.theconversation.com/content/196810/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Bruce Bradbury receives funding from the Australian Research Council, conducts contract research for other government bodies and is involved in a Poverty and Inequality research collaboration between UNSW and ACOSS. </span></em></p>Rent assistance is only $10-14 per day, well below rent levels.Bruce Bradbury, Associate Professor, Social Policy Research Centre, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1891542022-09-04T00:51:04Z2022-09-04T00:51:04ZRent crisis? Average rents are increasing less than you might think<p>You wouldn’t know it from the pages of our daily newspapers, but the rate of growth in rents has been pretty modest. </p>
<p>Not everywhere, not for everyone, but for most Australians who rent.</p>
<p>According to the most recent count used by the Bureau of Statistics to compile the consumer price index, rents increased by only <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release#overview">1.6%</a> in the year to June. </p>
<p>By comparison, wages climbed <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/latest-release">2.6%</a>.</p>
<p>Higher increases in other prices pushed the overall consumer price index up
<a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release">6.1%</a>. </p>
<p>Rent decreases during COVID mean that over the past five years the total increase has been just 1.5%. </p>
<p>Average rents are barely any higher than they were at the start of COVID.</p>
<hr>
<p><iframe id="GnFV0" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/GnFV0/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>The Bureau gets its data direct from the computers of real estate agents, state housing authorities and the Department of Defence (for Darwin). </p>
<p>It covers rent actually paid, for a “<a href="https://www.abs.gov.au/statistics/detailed-methodology-information/concepts-sources-methods/consumer-price-index-concepts-sources-and-methods/2018/price-collection">matched sample</a>” of dwellings, meaning it refers to the same dwellings each quarter so as to record genuine price changes.</p>
<h2>Actual versus advertised rents</h2>
<p>In contrast, the media (and some <a href="https://everybodyshome.com.au/resources/housing-criticalthe-role-of-housing-in-solving-critical-skill-shortages-across-the-regions/">interest groups</a>) prefer to focus on the data for “advertised” or asking rents. These have been growing more strongly than the overall mass of rents paid. </p>
<p>Nationwide, advertised rents climbed <a href="https://www.corelogic.com.au/news-research/news/2022/residential-rents-hit-record-highs-as-national-vacancy-rates-plummet">8.2%</a> in the year to June, and by almost 18% over the five years to June on CoreLogic’s data.</p>
<p>But advertised rents are only a tiny fraction of the rents actually paid. Not all properties get advertised. Advertised rents don’t always match up with the agreed rent. Most renters remain on existing contracts. </p>
<p>Although advertised rents might be expected to relate to overall rents over time, they are not necessarily representative of the entire market.</p>
<p>Our main concern ought to be what has happened to low-income renters. </p>
<h2>Low increases for low-income renters</h2>
<p>Australia’s lowest-income renters receive rent assistance, which is pretty frugal. Single renters get no more than <a href="https://www.servicesaustralia.gov.au/how-much-rent-assistance-you-can-get?context=22206">$73 a week</a>, and very large families up to $97.</p>
<p>But the typical rent paid by Australians on rent assistance hasn’t increased much. Over the year to June, the median rent for rent assistance recipients climbed by 1% – roughly $5 per week. Over the past five years it has increased 9% – somewhat less than the increase in the consumer price index of 10.7%.</p>
<p>Over the longer term, low-income rents have increased more sharply. Households in the bottom 40% of income distribution used to spend around 22% of their after-tax income on rent, and now spend about 30%, down from a peak of 32%.</p>
<hr>
<p><iframe id="pRiMR" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/pRiMR/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>If there is a crisis in rents, the figures suggest it is not widespread.</p>
<p>Rents in locations including Perth and Darwin are climbing much more strongly than others as they come off long periods of negative rent growth.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/renters-spend-10-times-as-much-on-housing-as-petrol-wheres-their-relief-180702">Renters spend 10 times as much on housing as petrol. Where's their relief?</a>
</strong>
</em>
</p>
<hr>
<p>The growth in asking rents is most pronounced away from the cities, in particular in holiday and tree-change destinations such as Richmond-Tweed (including Byron Bay), Gold Coast, Sunshine Coast and Wide Bay. </p>
<p>Some were experiencing strong growth in asking rents before COVID, which accelerated through COVID.</p>
<hr>
<p><iframe id="JMbb7" class="tc-infographic-datawrapper" src="https://datawrapper.dwcdn.net/JMbb7/2/" height="400px" width="100%" style="border: none" frameborder="0"></iframe></p>
<hr>
<p>Other regions, including parts of Sydney and Melbourne, have experienced subdued or <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/consumer-price-index-australia/latest-release#overview">negative</a> growth. </p>
<p>Across all renting households we are yet to see any serious growth. To date, the “rent crisis” has been felt mainly in a few specific locations and among people looking for new rental properties.</p><img src="https://counter.theconversation.com/content/189154/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Ben Phillips does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The big increases quoted are for “asking rents”. The rents paid by existing renters are climbing more slowly.Ben Phillips, Associate Professor, Centre for Social Research and Methods, Director, Centre for Economic Policy Research (CEPR), Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1807022022-04-11T19:57:42Z2022-04-11T19:57:42ZRenters spend 10 times as much on housing as petrol. Where’s their relief?<p>If the pre-election budget was designed to address the cost of living, it missed something. In an effort to help those whose wages aren’t growing as quickly as prices, it offered</p>
<ul>
<li><p>a one-off A$250 payment to <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/parliament-passes-legislation-lower-costs-and-support">income support recipients</a></p></li>
<li><p>a temporary increase in the <a href="https://theconversation.com/this-pointless-1-080-tax-break-should-have-ended-years-ago-but-has-become-hard-to-stop-177546">low-and-middle-income tax offset</a></p></li>
<li><p>a six-month halving of the <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/parliament-passes-legislation-lower-costs-and-support">fuel excise</a></p></li>
</ul>
<p>But it failed to offer help to some of the Australians who need it the most.</p>
<p>Australians only spend <a href="https://www.abs.gov.au/articles/automotive-fuel-cpi">3 per cent of their incomes</a> on petrol. The typical renter spends more than <a href="https://www.abs.gov.au/statistics/economy/finance/household-expenditure-survey-australia-summary-results">10 times</a> as much on rent. </p>
<p>After a minor and temporary reprieve early in the pandemic, advertised rents are again on the rise – <a href="https://sqmresearch.com.au/weekly-rents.php?national=1&t=1">up nearly 10%</a> over the last 12 months.</p>
<hr>
<p><strong>Weekly rents, national</strong> </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=235&fit=crop&dpr=1 600w, https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=235&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=235&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=295&fit=crop&dpr=1 754w, https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=295&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/457318/original/file-20220411-12-hcsbpg.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=295&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://theconversation.com/1-billion-per-year-or-less-could-halve-rental-housing-stress-146397">SQM Research</a></span>
</figcaption>
</figure>
<hr>
<p>Low-income renters are especially hard hit. More than half suffer <a href="https://grattan.edu.au/wp-content/uploads/2022/03/Grattan-Institute-Submission-to-the-PC-review-of-the-NHHA.pdf">rental stress</a>, meaning they spend more than 30% of their income on rent.</p>
<p>One-third have <a href="https://www.theguardian.com/australia-news/2022/mar/30/scott-morrison-says-best-way-to-help-renters-is-to-help-them-buy-a-house-federal-budget">less than $500 of savings on hand</a> in the event of an emergency.</p>
<p>Prime Minister Scott Morrison has responded to complaints about rent by saying the “<a href="https://www.theguardian.com/australia-news/2022/mar/30/scott-morrison-says-best-way-to-help-renters-is-to-help-them-buy-a-house-federal-budget">best way to support people renting a house is to help them buy a house</a>”.</p>
<h2>Cutting deposits can’t cut it</h2>
<p>Morrison points to the federal government’s decision to more than double the size of the <a href="https://ministers.treasury.gov.au/ministers/josh-frydenberg-2018/media-releases/2022-23-budget-backs-aspiring-homeowners">Home Guarantee Scheme</a>, which helps people buy a home with less than the standard 20% deposit.</p>
<p>From this year, up to 50,000 people will be able to access the scheme, under which the government offers a guarantee to the banks that cuts the up-front deposit to 5% for ordinary first home buyers and just 2% for 5,000 single parents. There are 10,000 places reserved for regional house buyers.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-compelling-case-for-a-future-fund-for-social-housing-172508">The compelling case for a future fund for social housing</a>
</strong>
</em>
</p>
<hr>
<p>The expanded scheme will help some Australians buy their first home earlier, but for everyone else looking to buy a house, the extra demand created by the scheme risks pushing up prices even higher. </p>
<p>And many renters won’t be able to find even the 5% deposit. Five per cent of $600,000 is $30,000.</p>
<h2>Rent assistance assists less</h2>
<p>If we really wanted to help low-income renters, we would boost rent assistance.</p>
<p><a href="https://www.dss.gov.au/housing-support/programmes-services/commonwealth-rent-assistance">Commonwealth Rent Assistance</a> is paid to pensioners, other beneficiaries and those receiving more than the base rate of Family Tax Benefit Part A who rent in the private rental market or community housing. </p>
<p>Paid at the rate of 75 cents for every dollar of rent above a threshold until a maximum, it works out at up to for <a href="https://www.servicesaustralia.gov.au/how-much-rent-assistance-you-can-get?context=22206">$72.90</a> a week for a single and $68.70 for each member of a couple.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/1-billion-per-year-or-less-could-halve-rental-housing-stress-146397">$1 billion per year (or less) could halve rental housing stress</a>
</strong>
</em>
</p>
<hr>
<p>It hasn’t kept pace with rent. Boosting it by 40%, (roughly $1,450 a year for a single), would restore it to where it was in relation to rent, albeit at a substantial cost – <a href="https://www.dss.gov.au/sites/default/files/documents/03_2022/2022-23_social_services_pbs.pdf">$2 billion per year</a>.</p>
<p>If the new rate was linked to the rents low-income earners actually pay, rather than to overall inflation as it has been, renters would be protected in the future.</p>
<p>Some argue this would lead to higher rents. But <a href="https://www.ahuri.edu.au/research/final-reports/342">that’s unlikely</a>. Most low-income renters first pay what’s needed to put a roof over their heads, then use what they have left to cover food and other bills, rather than offering more rent.</p>
<h2>Rents needs properties</h2>
<p>The other thing governments can do is to increase the number of homes.</p>
<p>Australian cities are not delivering denser forms of housing – <a href="https://www.afr.com/link/follow-20180101-p57uw">townhouses and apartments</a> – in the quantities Australians say they want. </p>
<p>The people who already live in a given suburb usually want it to stay as it is, whereas the people who would like to live there don’t get a say because they can’t vote in council elections. Their interests are left unrepresented, meaning housing isn’t built where it is needed.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/older-women-often-rent-in-poverty-shared-home-equity-could-help-177452">Older women often rent in poverty – shared home equity could help</a>
</strong>
</em>
</p>
<hr>
<p>The Commonwealth can help drive change by offering the states <a href="https://grattan.edu.au/wp-content/uploads/2022/03/Grattan-Institute-Submission-to-the-PC-review-of-the-NHHA.pdf">incentives</a> tied to how well housing supply keeps up with population growth.</p>
<p>This will only reduce rents slowly, but low-income renters stand to gain the most since they are the first to lose out in the scramble today, just as they seem to have lost out in the pre-election budget.</p><img src="https://counter.theconversation.com/content/180702/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute's board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities, as disclosed on its website.</span></em></p><p class="fine-print"><em><span>Brendan Coates does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Advertised rents have climbed 10% in the past year. A $250 boost to benefits and a six-month cut in petrol tax won’t much help.Joey Moloney, Senior Associate, Grattan InstituteBrendan Coates, Program Director, Economic Policy, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1510952020-12-01T19:07:19Z2020-12-01T19:07:19ZWhat did COVID do to rental markets? Rents fell as owners switched from Airbnb<p>COVID-related travel restrictions and the sudden drop in tourism provided an ideal <a href="https://www.britannica.com/science/natural-experiment">natural experiment</a> to examine the impact of shifts in the supply of short-term rental accommodation. Our <a href="http://www.ahuri.edu.au/research/final-reports/348">research</a>, released today, found even modest reductions in Airbnb listings, as owners switched to longer-term rentals, increased supply of these properties. The result was lower local rents.</p>
<p>The COVID-19 pandemic caused various upheavals, with obvious impacts on health and <a href="https://www.abs.gov.au/articles/slowdown-covid-19-job-losses">employment</a>, as well as a big <a href="https://www.abs.gov.au/statistics/industry/tourism-and-transport/overseas-arrivals-and-departures-australia/latest-release">drop in international migration</a>. The impacts of these changes on rental markets are extremely difficult to track, particularly the impacts on people on the margins of the rental housing system. We investigated these impacts by analysing online listings on common online platforms for share/low-rent housing and short-stay accommodation. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/as-coronavirus-hits-holiday-lettings-a-shift-to-longer-rentals-could-help-many-of-us-134036">As coronavirus hits holiday lettings, a shift to longer rentals could help many of us</a>
</strong>
</em>
</p>
<hr>
<p>Listings data show images, prices and descriptions of rental housing. These data provide an insight into this largely <a href="https://journals.sagepub.com/doi/abs/10.1177/0042098020915822">hidden</a> sector of the housing market.</p>
<p>Of particular concern are people who:</p>
<ul>
<li><p>are living in <a href="https://apo.org.au/sites/default/files/resource-files/2019-04/apo-nid232186.pdf">substandard</a> and/or unsafe rental housing while being required to stay home</p></li>
<li><p>have precarious tenures that put them at <a href="https://www.abc.net.au/news/2020-02-12/foreign-student-evicted-from-perth-house-over-coronavirus-fears/11959530">risk of eviction</a> or displacement</p></li>
<li><p>are living in overcrowded housing with shared facilities that <a href="https://pubmed.ncbi.nlm.nih.gov/33137155/">increase risks of disease transmission</a>.</p></li>
</ul>
<h2>What happened to these rentals?</h2>
<p>Online <a href="https://www.tandfonline.com/doi/full/10.1080/19491247.2020.1805147">platforms have transformed</a> the ways in which people search for and advertise housing, so offer unique insights into the market.</p>
<p>We looked at listings of share housing and lower-cost rentals on Flatmates.com.au, Gumtree.com.au and Realestate.com.au between April and May 2020. We also looked at short-stay rentals on Airbnb.</p>
<p>Our primary focus was on Sydney, where Australia’s rental affordability pressures are <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0024/53619/AHURI-Final-Report-323-The-supply-of-affordable-private-rental-housing-in-Australian-cities-short-term-and-longer-term-changes.pdf">most extreme</a>. </p>
<p>We found demand for, and supply of, risky rental accommodation in Sydney continued during the pandemic.</p>
<p>In snapshots taken during lockdown restrictions in Sydney in April and May 2020, there were:</p>
<ul>
<li><p>402 advertisements for rooms or granny flats on Gumtree.com.au in May</p></li>
<li><p>4,731 share accommodation listings on Flatmates.com.au in April</p></li>
<li><p>2,923 people seeking accommodation via Flatmates.com.au in April.</p></li>
</ul>
<figure class="align-center ">
<img alt="Screenshot from Flatmates website" src="https://images.theconversation.com/files/372143/original/file-20201201-17-11qr7r8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372143/original/file-20201201-17-11qr7r8.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=354&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372143/original/file-20201201-17-11qr7r8.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=354&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372143/original/file-20201201-17-11qr7r8.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=354&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372143/original/file-20201201-17-11qr7r8.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=445&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372143/original/file-20201201-17-11qr7r8.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=445&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372143/original/file-20201201-17-11qr7r8.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=445&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Demand for and supply of shared accommodation on online platforms like Flatmates continued during the pandemic.</span>
<span class="attribution"><a class="source" href="https://flatmates.com.au/">Flatmates</a></span>
</figcaption>
</figure>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/covid-spurred-action-on-rough-sleepers-but-greater-homelessness-challenges-lie-ahead-147102">COVID spurred action on rough sleepers but greater homelessness challenges lie ahead</a>
</strong>
</em>
</p>
<hr>
<h2>Which renters are most at risk?</h2>
<p>Of additional concern are older people in risky rentals who are <a href="https://www.health.gov.au/news/health-alerts/novel-coronavirus-2019-ncov-health-alert/advice-for-people-at-risk-of-coronavirus-covid-19/coronavirus-covid-19-advice-for-older-people">more at risk</a> of severe COVID-19 symptoms. More than 6,400 renters over the age of 60 lived in share (“group”) households in Sydney at the time of the <a href="http://www.ahuri.edu.au/research/final-reports/348">2016 census</a>. It was estimated over 4,600 were homeless.</p>
<p>People working in public-facing roles such as healthcare workers, and in food and accommodation services are also at <a href="https://www.acpjournals.org/doi/10.7326/L20-0175?url_ver=Z39.88-2003&rfr_id=ori%3Arid%3Acrossref.org&rfr_dat=cr_pub++0pubmed&">risk of virus transmission</a>. Many of them live in unsuitable rental housing due to the low-paid and transient nature of their work.</p>
<p>According to the <a href="http://www.ahuri.edu.au/research/final-reports/348">2016 census</a>, over 8,400 healthcare and social assistance workers were living in rented group households in Sydney. Over 1,800 were estimated to be homeless. One Flatmates.com listing clearly expressed the difficulties healthcare workers’ face when seeking a share rental during the pandemic:</p>
<blockquote>
<p>For those who think I might have COVID just because I’m a nurse, I can assure you that I don’t have COVID!!! :P (Flatmates “person” listing, April 2020)</p>
</blockquote>
<p>The difficulties lower-income renters face in Australia’s major cities reflect a chronic <a href="https://www.ahuri.edu.au/research/final-reports/323">undersupply of social and affordable housing</a>. Pre-pandemic <a href="https://www.ahuri.edu.au/research/final-reports/305">studies</a> suggested the rise of short-term accommodation platforms such as Airbnb added to these pressures by draining properties from the permanent rental supply.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/as-demand-for-crisis-housing-soars-surely-we-can-tap-into-covid-19-vacancies-143815">As demand for crisis housing soars, surely we can tap into COVID-19 vacancies</a>
</strong>
</em>
</p>
<hr>
<h2>What happened to short-term rental housing?</h2>
<p>We looked at Airbnb listings in Sydney and Hobart between March and April 2020. Using <a href="http://insideairbnb.com/">Inside Airbnb</a> data, we found the number of whole homes listed on Airbnb for more than 60 days a year decreased by 22% in Hobart and 14% in Sydney in that time.</p>
<figure class="align-center ">
<img alt="Airbnb home page for Sydney" src="https://images.theconversation.com/files/372144/original/file-20201201-15-1h7a23i.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/372144/original/file-20201201-15-1h7a23i.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=295&fit=crop&dpr=1 600w, https://images.theconversation.com/files/372144/original/file-20201201-15-1h7a23i.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=295&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/372144/original/file-20201201-15-1h7a23i.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=295&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/372144/original/file-20201201-15-1h7a23i.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=371&fit=crop&dpr=1 754w, https://images.theconversation.com/files/372144/original/file-20201201-15-1h7a23i.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=371&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/372144/original/file-20201201-15-1h7a23i.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=371&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">There were significant falls in home listings on Airbnb in Sydney and Hobart after the pandemic hit.</span>
<span class="attribution"><a class="source" href="https://www.airbnb.com.au/sydney-australia/stays">Airbnb</a></span>
</figcaption>
</figure>
<p>Vacancy rates, rental bonds data and Flatmates.com.au listings suggest these decreases occurred because Airbnb owners <a href="https://www.domain.com.au/news/short-term-holidays-lets-switch-back-to-longer-term-rentals-amid-coronavirus-crisis-944248/">converted their properties into permanent rentals</a>.</p>
<p>This translated to better outcomes for local renters. Even modest reductions in Airbnb listings were associated with increased permanent rental supply and lower local rents. </p>
<p>Median rents decreased in the June quarter in nine selected Sydney local government areas (LGAs) and Hobart’s four main LGAs. Rents fell by 2-9% in both cities.</p>
<p>Hobart was a particularly interesting case study because of its large penetration of Airbnb. The Airbnb market in Hobart City LGA is about 11% of the total private rental market. It experienced a much smaller drop in rental demand than Sydney because of its smaller number of temporary overseas migrants. </p>
<p>The drop in rents was directly proportional to the size of the Airbnb market in each LGA. Hobart City with an Airbnb density of 11% had a decrease in median rents of 9%. Glenorchy with an Airbnb density of 1% had only a 2% decrease in median rents.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ever-wondered-how-many-airbnbs-australia-has-and-where-they-all-are-we-have-the-answers-129003">Ever wondered how many Airbnbs Australia has and where they all are? We have the answers</a>
</strong>
</em>
</p>
<hr>
<h2>How to improve life for renters on the margins</h2>
<p>Our study contributes to a growing body of evidence on ways to improve the housing circumstances of lower-income renters and people at risk of homelessness.</p>
<p>Government action, such as increased <a href="https://www.servicesaustralia.gov.au/individuals/services/centrelink/jobseeker-payment">JobSeeker</a> and <a href="https://www.servicesaustralia.gov.au/individuals/subjects/payments-and-services-during-coronavirus-covid-19/if-you-get-income-from-jobkeeper-payment">JobKeeper</a> payments during the pandemic, has helped people to continue to pay rent and avoid resorting to precarious rental situations. However, even with these increases low-income renters <a href="https://thenewdaily.com.au/news/national/2020/12/01/rent-affordability-australia/">can struggle to pay</a> rent in unaffordable markets.</p>
<p>Obviously, <a href="https://communityhousing.org.au/media-releases/budget-needs-to-go-beyond-loans-to-boost-housing-and-construction/">increasing the supply</a> of <a href="https://www.vic.gov.au/homes-victoria-housing-explainer">social and affordable housing</a> would reduce dependence on the precarious and marginal rental market.</p>
<p>Similarly, a permanent increase in income-support payments such as JobSeeker and/or <a href="https://www.dss.gov.au/housing-support/programmes-services/commonwealth-rent-assistance">Commonwealth Rent Assistance</a> would enable more households to get adequate housing without extreme financial stress.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/1-billion-per-year-or-less-could-halve-rental-housing-stress-146397">$1 billion per year (or less) could halve rental housing stress</a>
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</em>
</p>
<hr>
<p>Higher regulation of the private rental sector would increase security for tenants and improve accommodation standards. We could look to New Zealand’s “<a href="https://www.tenancy.govt.nz/about-tenancy-services/news/healthy-homes-standards-announced/">healthy homes</a>” framework for inspiration.</p>
<p>Finally, to preserve permanent housing supply in high-demand markets, states should impose controls on short-term Airbnb-style rentals.</p>
<p>These steps are critical to provide safe and secure accommodation for those on the margins of housing markets as part of Australia’s post-pandemic recovery.</p><img src="https://counter.theconversation.com/content/151095/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Caitlin Buckle receives funding from the Australian Housing and Urban Research Institute (AHURI).</span></em></p><p class="fine-print"><em><span>Nicole Gurran receives funding from the Australian Research Council (ARC) and the Australian Housing & Urban Research Institute(AHURI). </span></em></p><p class="fine-print"><em><span>Patrick Harris receives funding from The Australian Housing and Urban Research Institute (AHURI). He is affiliated with the Public Health Association of Australia. </span></em></p><p class="fine-print"><em><span>Peter Phibbs receives funding from the Australian Housing and Urban Research Institute (AHURI). </span></em></p><p class="fine-print"><em><span>Tess Lea receives funding from the Australian Research Council and the Australian Housing and Urban Research Institute. She is affiliated with Healthabitat. </span></em></p><p class="fine-print"><em><span>Rashi Shrivastava does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Analysis of online listings on common online platforms shows even modest reductions in Airbnb listings increased supply of longer-term rentals. The result was lower local rents.Caitlin Buckle, Research Associate in Housing Studies, University of SydneyNicole Gurran, Professor of Urban and Regional Planning, University of SydneyPatrick Harris, Senior Research Fellow, (Acting) Deputy Director, CHETRE, UNSW SydneyPeter Phibbs, Director, Henry Halloran Trust, University of SydneyRashi Shrivastava, Research Assistant, University of SydneyTess Lea, Associate Professor, Gender and Cultural Studies, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1504652020-11-22T18:54:50Z2020-11-22T18:54:50ZWhat matters is the home: most retirees well off, some very badly off<figure><img src="https://images.theconversation.com/files/370635/original/file-20201122-17-cq4zkw.jpg?ixlib=rb-1.1.0&rect=29%2C275%2C3964%2C2688&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">zstock/Shutterstock</span></span></figcaption></figure><p>The government’s <a href="https://treasury.gov.au/publication/p2020-100554">Retirement Incomes Review</a> paints an encouraging picture of the finances of retired Australians. </p>
<p>Most are at least as well off in retirement as they were while working, and most are more financially satisfied and less financially-stressed than Australians of working age.</p>
<p>But not all. The <a href="https://treasury.gov.au/sites/default/files/2020-11/p2020-100554-00bkey-observations_0.pdf">huge exception</a> is retirees who do not own their own homes.</p>
<p>Whereas very few retired home owners are in poverty, most retired renters are.</p>
<hr>
<p><strong>Income poverty rates of retirees</strong></p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/370621/original/file-20201122-21-a2q65q.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/370621/original/file-20201122-21-a2q65q.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=263&fit=crop&dpr=1 600w, https://images.theconversation.com/files/370621/original/file-20201122-21-a2q65q.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=263&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/370621/original/file-20201122-21-a2q65q.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=263&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/370621/original/file-20201122-21-a2q65q.JPG?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=331&fit=crop&dpr=1 754w, https://images.theconversation.com/files/370621/original/file-20201122-21-a2q65q.JPG?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=331&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/370621/original/file-20201122-21-a2q65q.JPG?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=331&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Note: Data relates to 2017-18 financial year. Elevated poverty rate defined as 5 percentage points above retiree average.Retirees are where household reference person is aged 65 and over. There is overlap between some categories, for example, early retired and renter categories. Early retired means aged 55-64 and not in the labour force. Housing costs includes the value of both principal and interest components of mortgage repayments.</span>
<span class="attribution"><a class="source" href="https://treasury.gov.au/publication/p2020-100554">Source: Analysis of ABS Survey of Income and Housing Confidentialised Unit Record File, 2017-18</a></span>
</figcaption>
</figure>
<hr>
<p>So bad is the divide, the review found that even a 40% increase in Commonwealth Rent Assistance (the payment for pensioners) would reduce financial stress among renters by only 1%.</p>
<p>This is because rent assistance is low, covering only about 13% of the cost of renting. </p>
<p>Retirees who own their own homes don’t have to pay rent (and can still get the pension should their wealth be tied up in their home), and have a source of wealth that usually eclipses both their own superannuation and the wealth of renters.</p>
<hr>
<p><strong>Equivalised household wealth by asset type for retirees</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=285&fit=crop&dpr=1 600w, https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=285&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=285&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=358&fit=crop&dpr=1 754w, https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=358&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/370628/original/file-20201122-15-18ab82j.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=358&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Note: Retirees are defined as households where the reference person is aged 65 or older and is no longer in the labour force. Household wealth has been equivalised using the OECD equivalence scale in order to take account of differences in a household’s size and composition. Values in 2017-18 dollars.</span>
<span class="attribution"><span class="source">ABS, Retirement Incomes Review</span></span>
</figcaption>
</figure>
<hr>
<p>Most people do not regard their home as a retirement asset, a view compounded by rules that exempt it from taxes and the pension assets test.</p>
<p>They are also reluctant to borrow against the value of their home using facilities such as the <a href="https://www.servicesaustralia.gov.au/individuals/services/centrelink/pension-loans-scheme">Pension Loans Scheme</a>, for the same reasons they are reluctant to touch any of the wealth they retire with.</p>
<p>Data provided to the review by a large super fund shows its members typically die with 90% of what they had at retirement.</p>
<h2>Most retirees don’t use what they’ve got</h2>
<p>Another study finds age pensioners die with about 90% of what they had on retirement.</p>
<p>Partly the reasons are psychological. The review says words such as “investments”, “savings” and “nest eggs” imply the assets aren’t for living on. </p>
<p>Before compulsory super, employer-sponsored schemes usually paid “defined” benefits that could be measured in terms of income per year. </p>
<p>In the new system, designed to break the connection between workers and specific employers, benefits were “accumulated” in funds that could most easily be measured by the amount in them. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-we-should-worry-less-about-retirement-and-leave-super-at-9-5-106237">Why we should worry less about retirement - and leave super at 9.5%</a>
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<p>It is difficult for most people to see how a lump sum converts into income stream, and even more difficult when it depends on the interaction with the pension.</p>
<p>Another reason retirees hang on to what they had on retirement might be a genuine (if misplaced) concern about the unexpected.</p>
<p>In fact, health and aged care costs are heavily subsidised. Most people’s spending on them doesn’t increase significantly throughout retirement, yet many people seem unaware of how little of their own funds they will need.</p>
<p>Partly this is because of the complexity of the aged care and health care systems and how poorly they are explained.</p>
<h2>It’s created two systems</h2>
<p>Providing help to retirees who actually need it (mainly renters, many of them single women) and getting people with assets in the form of superannuation, savings and housing to actually use them rather than pass them on in bequests are the two key challenges identified in the report.</p>
<p>They are problems that boosting the rate of compulsory super contributions (as pushed for by the funds and <a href="https://theconversation.com/retirement-incomes-review-finds-problems-more-super-wont-solve-150529">presently leglislated</a>) won’t help with.</p>
<p>They are set to become worse.</p>
<p>Although home ownership rates remain high for people over the age of 65, a growing number of Australians are not entering the housing market. </p>
<p>Over 15 years, the number of Australians over 65 who do not own their home outright is <a href="https://theconversation.com/fall-in-ageing-australians-home-ownership-rates-looms-as-seismic-shock-for-housing-policy-120651">expected to double</a>.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/fall-in-ageing-australians-home-ownership-rates-looms-as-seismic-shock-for-housing-policy-120651">Fall in ageing Australians' home-ownership rates looms as seismic shock for housing policy</a>
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<p>As the amount in super funds grows (boosted by the legislated increase in compulsory contributions, should it take place), Australians with super are going to have even more relative to what they need and even less need to make use of it.</p>
<p>The report makes no recommendations, and doesn’t suggest that the solutions are easy.</p>
<p>Widening the pension asset test to include the home would leave many homeowners worse off and could generate distrust and destabilise the system.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/retirement-incomes-review-finds-problems-more-super-wont-solve-150529">Retirement incomes review finds problems more super won't solve</a>
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</em>
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<p>Getting more Australians into home ownership has proved difficult and could never be a solution for all Australians, in any case.</p>
<p>We already have in place rules that require retirees to draw down their super, but often they withdraw the minimum amount permitted and then reinvest much of it in another savings vehicle outside of super. </p>
<p>We’ve created a system where most have enough or more than enough to retire on and others get nothing like enough.</p><img src="https://counter.theconversation.com/content/150465/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Helen Hodgson has received funding from the ARC, AHURI and CPA Australia. Helen is the Chair of the Social Policy Committee and a Director of the National Foundation for Australian Women (NFAW), and is on the Tax and Superannuation Advisory Panel of ACOSS. Helen was a Member of the WA Legislative Council in WA from 1997 to 2001, elected as an Australian Democrat. She is not a current member of any political party. She is a Registered Tax Agent and a member of the SMSF Association.</span></em></p>Most retired renters are in poverty, very few home owners are.Helen Hodgson, Professor, Curtin Law School and Curtin Business School, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1505292020-11-20T06:30:57Z2020-11-20T06:30:57ZRetirement incomes review finds problems more super won’t solve<figure><img src="https://images.theconversation.com/files/370504/original/file-20201120-17-3ehf2x.jpg?ixlib=rb-1.1.0&rect=107%2C425%2C3239%2C1832&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Robyn Mackenzie/Shutterstock</span></span></figcaption></figure><p>It would be a waste if the Friday’s mammoth <a href="https://treasury.gov.au/publication/p2020-100554">Retirement Incomes Review</a> was remembered only for its finding that increases in employers compulsory superannuation contributions come at the expense of wages.</p>
<p>That has <a href="https://theconversation.com/workers-bear-71-to-100-of-the-cost-of-increases-in-compulsory-super-150461">long been assumed</a>, and is what was <a href="https://treasury.gov.au/sites/default/files/2019-10/afts_retirement_incomes_consultation_paper.pdf">intended</a> when compulsory super was set up.</p>
<p>Compulsory super contributions are set to increase in five annual steps of<a href="https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?anchor=Superguaranteepercentage"> 0.5% of salary between 2021 and 2025</a>. </p>
<p>These are much bigger increases than the earlier two of 0.25% in 2012 and 2013.</p>
<p>And the wage rises they will be taken from will be much lower. The latest figures released on Wednesday point to shockingly low annual wage growth of <a href="https://www.abs.gov.au/statistics/economy/price-indexes-and-inflation/wage-price-index-australia/sep-2020">1.4%</a>. </p>
<p>Should each of the scheduled increases in employers compulsory super knock 0.4 points off wage growth (which is what the review expects) annual wage growth would sink from 1.4% to 1%. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/workers-bear-71-to-100-of-the-cost-of-increases-in-compulsory-super-150461">Workers bear 71% to 100% of the cost of increases in compulsory super</a>
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<p>Private sector wage would sink from 1.2% to 0.8%, in the absence of something to push it back up.</p>
<p>Because inflation will almost certainly be higher than 1%, it means the buying power of wages would go backwards, all for the sake of a better life in retirement.</p>
<p>The review presents the finding starkly. Lifting compulsory super contributions from 9.5% of salary to 12% will cut working-life incomes by about 2%.</p>
<p>And for what? It’s a question the review spends a lot of time examining.</p>
<h2>Most retirees have enough</h2>
<p>The review dispenses with the argument that the goal of a retirement income system should be “<a href="https://treasury.gov.au/sites/default/files/2020-11/p2020-100554-00bkey-observations_0.pdf">aspirational</a>”, or to provide people with higher income in retirement than they had in their working lives. </p>
<p>It finds that for retirees presently aged 65-74 the replacement rates for middle to higher income earners are generally adequate. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=962&fit=crop&dpr=1 600w, https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=962&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=962&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1210&fit=crop&dpr=1 754w, https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1210&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/265468/original/file-20190324-36267-olwp2z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1210&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="attribution"><a class="source" href="https://www.ato.gov.au/rates/key-superannuation-rates-and-thresholds/?anchor=Superguaranteepercentage">Source: Australian Tax Office</a></span>
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<p>Many lower-income earners get more per year in retirement than they got while working.</p>
<p>If the increases in compulsory super proceed as planned, this will extend to the bottom 60% of the income distribution. </p>
<p>They’ll enjoy a higher standard of living in retirement than while working (and will enjoy a lower standard of living while working than they would have). </p>
<p>Most retirees die with most of what they had when they retired, leaving it as a bequest. They are reluctant to “eat into” their super and other savings because of concerns about possible future health and aged care costs, and concerns about outliving savings.</p>
<p>The review quite reasonably sees this as a <a href="https://treasury.gov.au/sites/default/files/2020-11/p2020-100554-00bkey-observations_0.pdf">betrayal</a> of the purpose of government-supported super, saying</p>
<blockquote>
<p>superannuation savings are supported by tax concessions for the purpose of retirement income and not purely for wealth accumulation</p>
</blockquote>
<h2>It’s the pension that matters</h2>
<p>The pension does what super cannot. It provides a buffer for retirees whose income and savings fall due to market volatility, and for those who outlive their savings. 71% of people of age pension age get it or a similar payment. More than 60% of them get the full pension. </p>
<p>If there’s one key message of the review, it is this: it is the pension rather than super that matters for maintaining living standards in retirement, which is what the review was asked to consider.</p>
<p>It is also cost-effective compared to the growing budgetary cost of the super tax concessions.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-we-should-worry-less-about-retirement-and-leave-super-at-9-5-106237">Why we should worry less about retirement - and leave super at 9.5%</a>
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<p>The age pension costs 2.5% of GDP and is set to fall to 2.3% of GDP over the next 40 years as the super system matures and tighter means tests bite.</p>
<p>Treasury modelling prepared for the review shows that if more money is directed into super and away from wages as scheduled, the annual budgetary cost of the super tax concessions will exceed the cost of the pension by 2050.</p>
<h2>There’s a real retirement income problem</h2>
<p>A substantial proportion of Australians, about 30%, are financially worse off in retirement than while working, and they are people neither super nor the pension can help.</p>
<p>Mostly they are older Australians who have lost their jobs and cannot get new ones before they before eligible for the age pension or become old enough to get access to their super. Often they’ve left the workforce due to ill health or to care for others and are forced to rely on JobSeeker, which is well below the poverty line.</p>
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Read more:
<a href="https://theconversation.com/forget-more-compulsory-super-here-are-5-ways-to-actually-boost-retirement-incomes-132655">Forget more compulsory super: here are 5 ways to actually boost retirement incomes</a>
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<p>It’s much worse if they rent privately. About one quarter of retirees who rent privately are in financial stress, so much so that the review finds even a 40%
increase in the maximum Commonwealth Rent Assistance payment wouldn’t be enough to get them a decent standard of living in retirement.</p>
<h2>No recommendations, but findings aplenty</h2>
<p>The review was not asked to produce recommendations. Instead, while noting that much of the system works well, it has pointed to things that need urgent attention. </p>
<p>It finds that pouring a greater proportion of each pay packet into the hands of super funds is not the sort of attention needed, and in the present unusual circumstances could <a href="https://treasury.gov.au/sites/default/files/2020-11/p2020-100554-complete-report.pdf">cost jobs</a> as employers who can’t take the extra cost out of wages take it out of headcount.</p>
<p>The government will make a decision about whether to proceed with the legislated increase in compulsory super in its May budget, just before the first of the five increases due in July.</p><img src="https://counter.theconversation.com/content/150529/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Peter Martin does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Most Australians get enough to live on in retirement. Some get more they get while working, but 30% get less, and boosting super won’t help them.Peter Martin, Visiting Fellow, Crawford School of Public Policy, Australian National UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1463972020-11-01T19:04:55Z2020-11-01T19:04:55Z$1 billion per year (or less) could halve rental housing stress<figure><img src="https://images.theconversation.com/files/366395/original/file-20201029-23-ggfhgl.jpg?ixlib=rb-1.1.0&rect=88%2C82%2C3058%2C1532&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">apichai kleechaya/Shutterstock</span></span></figcaption></figure><p>COVID has shown us what’s possible when it comes to alleviating poverty.</p>
<p>For six months JobSeeker payments were <a href="https://theconversation.com/scalable-without-limit-how-the-government-plans-to-get-coronavirus-support-into-our-hands-quickly-134353">doubled</a> and then maintained at a level <a href="https://theconversation.com/jobseeker-supplement-cut-from-550-to-250-a-fortnight-after-september-143086">50% above normal</a>.</p>
<p>When the bonus finishes at year end it is likely to be <a href="https://www.smh.com.au/politics/federal/cruel-and-damaging-jobseeker-decision-held-until-december-budget-update-20201022-p567is.html">permanently increased</a> for the first time in almost 30 years.</p>
<p>Commonwealth rent assistance could do with the same sort of attention.</p>
<p>Rent assistance is at present added on to other payments such as the pension and JobSeeker and is inadequate, with on our calculations <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0019/65422/AHURI-Final-Report-342-Demand-side-assistance-in-Australias-rental-housing-market-exploring-reform-option.pdf">one-third</a> of the people who get it remaining in housing stress even when assisted, while around 18% of the low-income private renters who need it were excluded because they don’t receive one of the government payments to which it is tied.</p>
<p>Productivity Commission calculations suggest the number of private renters in housing stress has <a href="https://www.pc.gov.au/research/completed/renters/private-renters.pdf">doubled over the past two decades</a>, largely because rent assistance has failed to increase in line with rents.</p>
<h2>Rent assistance is much lower than it should be</h2>
<p>The Australian Council of Social Service wants a <a href="https://www.acoss.org.au/wp-content/uploads/2020/02/FINAL-ACOSS-Budget-Priority-Statement-2020-2021.pdf">30%</a> in increase in the maximum rate of rental assistance. The Grattan Institute has called for a <a href="https://grattan.edu.au/wp-content/uploads/2019/04/916-Commonwealth-Orange-Book-2019.pdf">40%</a> increase. </p>
<p>Even the Productivity Commission wants a <a href="https://www.pc.gov.au/inquiries/completed/human-services/reforms/report/human-services-reforms.pdf">15%</a> increase to restore what’s been lost over the past decade. </p>
<p>The maximum rates paid are $69.80 per week for single person and <a href="https://www.servicesaustralia.gov.au/individuals/services/centrelink/rent-assistance">$92.68</a> for a couple with three children. </p>
<p>As any renter knows only too well, these amounts represent only a fraction of the present cost of renting in most parts of Australia.</p>
<h2>It’s also badly targeted</h2>
<p>Our <a href="https://www.ahuri.edu.au/__data/assets/pdf_file/0019/65422/AHURI-Final-Report-342-Demand-side-assistance-in-Australias-rental-housing-market-exploring-reform-option.pdf">study</a> for the <a href="https://www.ahuri.edu.au/about-us/who-we-are-and-what-we-do">Australian Housing and Urban Research Institute</a> finds that (in 2017) an extraordinary 23.4% of the renters who received Commonwealth rent assistance weren’t in housing stress. At the same time 17.5% of the renters in housing stress didn’t receive Commonwealth rent assistance.</p>
<p>These calculations were made using the standard definition of housing stress for low income earners which is rent that exceeds 30% of gross income.</p>
<p>We examined three options to better match payments to housing stress:</p>
<ul>
<li><p>raising the maximum rate of Commonwealth rent assistance by 30%</p></li>
<li><p>re-balancing the rent thresholds to address higher levels of housing stress among households with no children</p></li>
<li><p>changing the eligibility criteria to pay rent assistance to low-income private renters facing rents exceeding 30% of their income whether or not they were on other benefits</p></li>
</ul>
<p>We found the first and second options would almost halve housing stress, cutting it from 848,500 households to 506,400 and 544,900.</p>
<p>The third option – extending rent assistance to all low income private renters and limiting it only to those fitting the standard definition of low income housing stress – would cut the number of households able to claim to 477,000.</p>
<h2>We could cut rental stress and save money</h2>
<p>The first option would cost $1 billion per year, the second would save $938 million and the third would save $1.2 billion.</p>
<p>That’s right, the best option would save money and would most accurately target payments to need.</p>
<p>But there’s a problem. Australia’s Constitution appears not to empower the federal government to make stand-alone rent assistance payments, which is why Commonwealth rent assistance is always tied to another payment. </p>
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<em>
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Read more:
<a href="https://theconversation.com/australias-housing-system-needs-a-big-shake-up-heres-how-we-can-crack-this-130291">Australia's housing system needs a big shake-up: here's how we can crack this</a>
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<p>To pay it to a wider group of low-income households, the Commonwealth government would need to either get a new source of constitutional power or to get state governments to administer it for them (as they do with first home owner grants).</p>
<p>And there are other potential hurdles.</p>
<p>Rent assistance acts as a <a href="https://www.aph.gov.au/DocumentStore.ashx?id=c5f4481d-7415-45e2-bba2-bee98aa9af6b">de facto subsidy</a> to community housing providers. Changes potentially affecting their tenants would need to be made carefully.</p>
<p>And there’s concern that increases in rent assistance will be captured by landlords in higher rents - much as appears to happen for <a href="https://www.prosper.org.au/2013/09/saul-eslake-50-years-of-housing-failure/">first home owner grants</a>.</p>
<h2>Most landlords won’t pocket increased assistance</h2>
<p>Our research found that in most areas and under most conditions this “subsidy capture” or rent inflation effect won’t be statistically significant. </p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=971&fit=crop&dpr=1 600w, https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=971&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=971&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1220&fit=crop&dpr=1 754w, https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1220&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/366626/original/file-20201030-14-174u54m.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1220&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Most landlords don’t lift rent with rent assistance.</span>
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</figure>
<p>The exception is disadvantaged areas, where our modelling suggests that a significant proportion of increases in rent assistance payments do flow through into rents, almost 33 cents in each rent assistance dollar. </p>
<p>This is likely caused by relatively unresponsive housing supply in low-value parts of the market. However, even in these areas the “capture” effect is smaller than in similar studies overseas. </p>
<p>This is probably because in Australia rent assistance is paid to tenants, rather than directly to landlords. </p>
<p>Despite these challenges, there are clear benefits to pursuing reform of Commonwealth rent assistance. </p>
<p>Indeed, it ought to be possible to both lift more Australians out of housing stress and save money.</p>
<p>The money saved should be diverted to supporting a broader housing affordability agenda that includes increased investment in public and community housing and tenancy law reform that improves security and other conditions. </p>
<p>This is especially important in more disadvantaged locations where private rental providers are less responsive.</p><img src="https://counter.theconversation.com/content/146397/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rachel Ong ViforJ receives funding from the Australian Housing and Urban Research Institute (AHURI) and the Australian Research Council (ARC). </span></em></p><p class="fine-print"><em><span>Chris Martin receives funding from the Australian Housing and Urban Research Institute (AHURI) and National Shelter. </span></em></p><p class="fine-print"><em><span>Hal Pawson receives funding from the Australian Research Council, from Launch Housing and from CRISIS (UK)</span></em></p><p class="fine-print"><em><span><a href="mailto:ranjodh.singh@curtin.edu.au">ranjodh.singh@curtin.edu.au</a> receives funding from AHURI</span></em></p>Some rent assistance is paid to households who don’t much need it. Others who do need it miss out.Rachel Ong ViforJ, Professor of Economics, School of Economics, Finance and Property, Curtin UniversityChris Martin, Senior Research Fellow, City Futures Research Centre, UNSW SydneyHal Pawson, Professor of Housing Research and Policy, and Associate Director, City Futures Research Centre, UNSW SydneyRanjodh B. Singh, Lecturer, Curtin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1228542019-09-08T20:01:26Z2019-09-08T20:01:26ZRudd’s rental affordability scheme was a $1 billion gift to developers. Abbott was right to axe it<figure><img src="https://images.theconversation.com/files/291051/original/file-20190905-175668-182un4t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Labor's so-called Rental Affordability Scheme did little to make those who most needed it, but it helped landlords.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>Most Australians are <a href="https://www.abs.gov.au/ausstats/abs@.nsf/mf/4130.0">spending more</a> of their income on housing than they used to, but low-income households are being squeezed the hardest.</p>
<p>Many are in <a href="https://www.acoss.org.au/wp-content/uploads/2018/10/ACOSS_Poverty-in-Australia-Report_Web-Final.pdf">poverty</a>, and many more are suffering <a href="https://grattan.edu.au/wp-content/uploads/2018/11/912-Money-in-retirement.pdf">financial stress</a>. A growing number of Australians are becoming <a href="https://blog.grattan.edu.au/2019/06/who-is-homeless-in-australia/">homeless</a>.</p>
<p>A decade ago the Rudd federal government established the National Rental Affordability Scheme – <a href="https://www.dss.gov.au/our-responsibilities/housing-support/programmes-services/national-rental-affordability-scheme">NRAS</a>. The scheme paid incentives to developers and community housing organisations that built new homes and rented them out for at least 20% below market rents for 10 years.</p>
<p>The Abbott government axed the scheme in 2014. Labor promised to reintroduce it if won the 2019 election. Now advocates of affordable housing are calling on the Morrison government to do the same.</p>
<p>But new research <a href="https://blog.grattan.edu.au/2019/09/learning-from-past-mistakes-lessons-from-the-national-rental-affordability-scheme/">published by the Grattan Institute today</a> concludes they are wrong. The NRAS was expensive, inefficient and mainly helped those not in greatest need.</p>
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Read more:
<a href="https://theconversation.com/on-housing-theres-clear-blue-water-between-the-main-parties-113556">On housing, there's clear blue water between the main parties</a>
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<p>Other policies, such as building social housing and boosting Commonwealth Rent Assistance, would be better targeted and waste less money along the way.</p>
<h2>Poor value for money</h2>
<p>The <a href="https://www.dss.gov.au/our-responsibilities/housing-support/programs-services/national-rental-affordability-scheme/national-rental-affordability-scheme-nras-incentive-indexation">value of the NRAS subsidy</a> was set much higher than it needed to be. </p>
<p>NRAS developers still on the program receive about A$11,000 of public money per unit per year (the subsidy was set originally at A$8,000, but indexed). </p>
<p>The problem is, A$11,000 is much more money than the developers need to cover the cost of the rental discount.</p>
<p>In 2016 the value of the 20% rental discount was slightly less than A$4,000 a year in the typical suburb in which NRAS properties were built. </p>
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Read more:
<a href="https://theconversation.com/ten-lessons-from-cities-that-have-risen-to-the-affordable-housing-challenge-102852">Ten lessons from cities that have risen to the affordable housing challenge</a>
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<p>The leftover value of the subsidy – about A$7,000 a year – was essentially a windfall gain for developers. </p>
<p>We estimate it provided windfall gains to private developers of at least A$1 billion, or roughly one-third of the <a href="https://www.anao.gov.au/work/performance-audit/national-rental-affordability-scheme-administration-allocations">total cost</a> of the scheme.</p>
<p>Community housing providers also received windfall gains, although they would have reinvested the funds into more affordable housing or deeper rental discounts for tenants.</p>
<p>The scheme was also poor value for money because the subsidy didn’t vary depending on location or type of dwelling: the same subsidy was offered for a one-bedroom apartment or a three-bedroom home. Not surprisingly, the scheme ultimately <a href="https://www.dss.gov.au/sites/default/files/documents/07_2019/nras-quarterly-report-march-2019.pdf">funded</a> a lot of small, cheap-to-build units.</p>
<h2>Not directed at those most in need</h2>
<p>The eligibility criteria were far too loose. </p>
<p>Someone can qualify to live in one of the NRAS dwellings left on the scheme with an income of <a href="https://www.dss.gov.au/our-responsibilities/housing-support/programs-services/national-rental-affordability-scheme/national-rental-affordability-scheme-nras-household-income-indexation">up to A$50,000</a> – a good deal higher than the <a href="https://blog.grattan.edu.au/2019/04/how-much-does-the-typical-australian-earn-the-answer-might-surprise-you/">median income</a>.</p>
<p>A couple can qualify if their household income is below A$70,000. </p>
<p>It means about half of all households that rent can qualify to live in an NRAS subsidised home. Half of them would be ineligible for Commonwealth Rent Assistance because their incomes are too high.</p>
<p>Only <a href="https://www.dss.gov.au/sites/default/files/documents/06_2017/nras_tenant_demographic_report_as_at_30_april_2016.pdf">one-third</a> of the households living in an NRAS home at the scheme’s peak in 2016 had gross household incomes below A$30,000 a year, whereas one-third had incomes above A$50,000 a year.</p>
<h2>No extra housing</h2>
<p>There’s also little evidence the NRAS led to much more housing being built than otherwise.</p>
<p>Government subsidies don’t create extra housing if they crowd out housing that would have been built anyway. Crowding out is most likely when supply is already constrained, as it is in major Australian cities where land-use rules <a href="https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf">prevent greater density</a> in established suburbs. International research suggests affordable housing <a href="https://www.sciencedirect.com/science/article/abs/pii/S0047272710000885">crowds out</a> private housing.</p>
<h2>No useful stimulus</h2>
<p>Nor was the NRAS a useful stimulus. It began in 2008 at the height of the global financial crisis, but most NRAS properties were <a href="https://www.dss.gov.au/sites/default/files/documents/07_2019/nras-quarterly-report-march-2019.pdf">only approved</a> between 2013 and 2015, by which time housing construction was <a href="https://grattan.edu.au/wp-content/uploads/2018/03/901-Housing-affordability.pdf">already booming</a>.</p>
<p><a href="https://www.anao.gov.au/work/performance-audit/administration-national-rental-affordability-scheme">Administrative difficulties</a> and a complex design made housing constructed through NRAS anything but timely.</p>
<h2>Better alternatives</h2>
<p>Instead of reinstating the NRAS, state and federal governments should focus on policies that will do the most (at least cost) to better house low-income Australians.</p>
<p>A Rudd-era policy the Morrison government should introduce is the <a href="http://www.nwhn.net.au/admin/file/content101/c6/social_housing_initiative_review.pdf">Social Housing Initiative</a>, which built 20,000 new social housing units and refurbished another 80,000 over two years at a cost of A$5.6 billion. </p>
<p>The economic hit was immediate: construction approvals spiked within 12 months of the announcement. A repeat today would provide a more effective boost to declining housing construction than a reinstated NRAS.</p>
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Read more:
<a href="https://theconversation.com/australias-social-housing-policy-needs-stronger-leadership-and-an-investment-overhaul-119097">Australia's social housing policy needs stronger leadership and an investment overhaul</a>
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<p><a href="https://grattan.edu.au/report/commonwealth-orange-book-2019/">Boosting</a> Commonwealth Rent Assistance by 40%, and indexing it to changes in rents typically paid by people receiving income support, would be a fairer and more cost-effective way to help the much larger number of lower-income earners struggling with housing costs. </p>
<p>It <a href="https://grattan.edu.au/wp-content/uploads/2018/11/912-Money-in-retirement.pdf">shouldn’t push up rents much</a> because only some of the extra assistance will be spent on housing.</p>
<p>The states should also <a href="https://theconversation.com/to-make-housing-more-affordable-this-is-what-state-governments-need-to-do-105050">fix planning rules</a> that prevent more homes being built in inner and middle-ring suburbs of our largest cities. It would help a bit to make housing cheaper to buy and rent. Reforming tenancy rules would make renting more secure.</p>
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Read more:
<a href="https://theconversation.com/to-make-housing-more-affordable-this-is-what-state-governments-need-to-do-105050">To make housing more affordable this is what state governments need to do</a>
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<p>There is a powerful case for governments to do more to help house low-income Australians. But unless we learn from past mistakes, we will wind up with another expensive housing policy that does little to help those who most need that support.</p><img src="https://counter.theconversation.com/content/122854/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Grattan Institute began with contributions to its endowment of $15 million from each of the Federal and Victorian Governments, $4 million from BHP Billiton, and $1 million from NAB. In order to safeguard its independence, Grattan Institute’s board controls this endowment. The funds are invested and contribute to funding Grattan Institute's activities. Grattan Institute also receives funding from corporates, foundations, and individuals to support its general activities as disclosed on its website. </span></em></p><p class="fine-print"><em><span>Jessie Horder-Geraghty does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The government is being pressed to bring back a particularly ineffective and wasteful scheme.Brendan Coates, Program Director, Household Finances, Grattan InstituteJessie Horder-Geraghty, Researcher, Grattan InstituteLicensed as Creative Commons – attribution, no derivatives.