Even under unlikely assumptions that rents don’t rise at all, the number of Australians requiring rent assistance from the government is expected to rise significantly over the next 15 years, a new report suggests.
In its latest report, the Australian Housing and Urban Research Institute (AHURI) said that even on unlikely assumptions that rents remain at current levels, a combination of demographic trends and growing numbers of people who rely upon the private rental market for shelter means that the number of Australians receiving Commonwealth Rent Assistance (CRA) will rise from 952,000 in 2011 to 1.5 million in 2031.
Over that same time, costs associated with CRA will rise from $2.8 billion to $4.5 billion.
According to the report, almost half of the increase will be driven by demographic trends, including an increase in the number of lone person and sole parent households – household types which statistically show a relatively high reliance on CRA than other household types such as married couples.
Female sole parent households, for example, are expected to increase by almost half from just over 800,000 to slightly under 1.2 million (male sole parent households are also expected to rise, but account for only a tiny portion of all sole parent households).
Meanwhile, the number of lone person households is expected to rise from just above 1.1 million to 1.5 million in the case of men and from around 1.0 million to almost 1.6 million for women.
The increase is also driven by the rising portion of stock which is owned by investors and offered up for private rental as a proportion of overall housing stock – a phenomenon which will see a relatively smaller percentage of households being owner occupiers or public housing tenants and a relatively larger portion dependent upon the private rental market for shelter.
The latest report comes amid ongoing fears about the adequacy of CRA payments in terms of assisting people to remain out of situations of housing stress – a situation which is being exacerbated as the level of CRA is indexed to inflation rather than the average cost of price increases within the private rental market.
A report published last year by the Australian Institute of Health and Welfare indicated that more than 40 per cent of Australians who receive CRA remained in a situation of ‘housing stress’ whereby housing related costs made up more than 30 per cent of their annual income.
In Sydney, for example, Domain Group data showed that average rents in the 12 months to March rose by 4.8 per cent.
Despite the rising costs associated with CRA, the report also found that subsidy payments afforded to tenants are considerably less costly compared with those afforded to home owners on an equivalent basis.
Around 730,000 home owners received higher income support payments in 2011 than would have been the case if they were treated in the same way as tenants under asset tests, it says – costing taxpayers more than double what they would have paid in respect of CRA payments.
Over that same period, CPI – upon which increases to CRA are calculated – rose by only 2.1 per cent.
The report also found that a secure lease scheme under which the government paid a rent premium to private landlords who offer five-year leases to eligible low-income families would be hundreds of billions of dollars cheaper in terms of a way to offer secure housing to low-income tenants.
Under a secure lease scheme, it said that more than 650,000 low income households who are eligible for public housing but currently live in private housing could have been given security over their private housing tenure over the five-year period spanning 2010 to 2014 at a cost of $10.1 billion in incentive payments to private landlords plus another $7.4 billion in Commonwealth Rent Assistance.
Were those same tenants to be housed in public housing, the cost would have been $238 billion in construction costs plus $13.1 billion in recurrent costs.
A mechanism designed to assist those on low incomes to meet essential costs of shelter but who do not live in public housing, CRA is a non-taxable income supplement paid to eligible low-income earners who rent either through the private market or through community housing.
Assistance is paid at a rate of 75 per cent of every dollar worth of rent payable over and above specified thresholds up to a maximum ranging from between $78 for a partner with one or two children to $132.20 to a single person with no children.