Government turns down smart reform of Rent Assistance

The ABC has reported some disappointing news about Rent Assistance, which is paid to some recipients of Centrelink payments and Family Tax Benefit.

The Federal Housing Minister, Tanya Plibersek, has ruled out increasing Rent Assistance payments, saying that the Government would prefer to increase the supply of affordable housing, and that

In a very tight rental market it's possible that an increase in the rent allowance would simply flow straight through to landlords in increased rents charged.

The Minister's comment makes a lot of sense – in fact, it would be nice to see this sort of sense applied to the First Home Owners Grant, which also flows straight through to existing property owners in increased prices charged.

The disappointment is that her government has passed up a smart proposal by ACOSS and National Shelter for an increase in Rent Assistance that directs, in a tightly targeted way, much-needed assistance to households with the worst housing affordability problems, while avoiding a general inflation in rents.

First, it helps to understand how Rent Assistance works. You get Rent Assistance if you're an eligible person whose rent is above a certain threshold (this threshold varies according to whether you're single or in a couple, and how many children you have). For every dollar of rent you have to pay above the threshold, you get 75 cents of Rent Assistance. Your Rent Assistance is also subject to a cap or maximum amount (this maximum amount also varies according to your household circumstances). At the moment, the maximum amount for a single person without kids is $110.20 per fortnight.

So, if you're in part of the country where rents are very high – say, inner Sydney, where the median 'new agreement' rent for a one-bedroom flat is $770 per fortnight – your Rent Assistance will max out at an amount that will leave you very short.

The smart thing to do is to lift the maximum amount of Rent Assistance. Doing so would help those renters most in need – without expanding the number of persons who receive Rent Assistance, and without increasing Rent Assistance payments across the board. This targeting means that the prospect of landlords simply increasing rents across the board is minimised.

A smart idea that has, alas, been turned down. What a shame that a fraction of the amount blown on the First Home Owners Grant Boost couldn't have gone to renters at the pointiest end of the affordable housing crisis.