Rentstart bond loans

More news for social housing applicants. We recently discussed the changed way in which the social housing register will be managed (that is, always have your contact details up-to-date, or you'll be struck off the register). Here's another change, coming soon: Rentstart bonds will be loans, and every fortnight you'll have to pay a bit back.

Some background: for years applicants for social housing have been able to get grants of money from Housing NSW to put towards the bond for a tenancy in the private market. Depending on your circumstances, Housing NSW might pay 75 per cent or 100 per cent of the bond. At the end of your tenancy, the money goes back to Housing NSW, unless claimed by the landlord.

And claim it they do. Many landlords and agents have come to see Rentstart bonds as a bit of a gift, and claim them even when they're really not entitled. And tenants often don't defend the claims, because the money doesn't go to them and they're probably still dealing with moving house (although, we do know tenants who have defended claims and gotten the money back for Housing NSW, because of the principle of the thing).

Tenants advocates – and, for that matter, officers of Housing NSW – have had mixed feelings about this aspect of Rentstart bonds. On the one hand, there are landlords and agents rorting it; on the other, it's helping get people housed in a private rental market that treats them very shabbily.

Now it's changing – the Rentstart bonds, that is; not the shabby treatment. The money will be given to eligible persons as a loan, to be repaid to Housing NSW over the next 12, 18 or 36 months.

The repayment period will depend on how much of your income you're spending on rent: if it's less than 45 per cent (only 45!), you must repay the loan over 12 months; if it's 45-50 per cent, you can repay over 18 months. If more than 50 per cent of your income goes on rent, Housing NSW wouldn't usually give you a Rentstart bond for what will be, in most cases, a doomed tenancy, but in the exceptional cases where they do, you can repay over 36 months. Repayments are to be made fortnightly.

Let's consider how this might work in practice, with the example of a typical social housing applicant – a single parent with one kid. This person's income might be about $1100 per fortnight (Parenting Payment, Family Tax Benefits, Rent Assistance). The median rent for a two-bedroom property in Sydney is $900 per fortnight – that's 80 per cent of her income, so she won't be renting that.

Let's say she finds, against the odds, a place for $480 per fortnight, and gets a Rentstart bond loan for the whole of the $960 bond. The rent's just under 45 per cent of her income, so she's got 12 months to repay the loan, at $37 per fortnight. That's on top of a rent that puts her well into 'housing stress'.

If you don't keep up, Housing NSW promises 'early, active engagement' to get you paying again. If you don't repay the loan, you may not get any further Rentstart assistance, and Housing NSW may commence legal proceedings against you to recover the debt.

We don't know when this change will commence – there's no statement we can see on Housing NSW's website, but there are a few mentions of Rentstart bond loans popping up in their paperwork, so expect it to happen soon. Let's hope by then that there's also an effort to let landlords and agents know that Rentstart bonds are not, if they ever were, gifts for them to claim at the end of a tenancy.