Australia's Future Tax System

Final Report: Detailed Analysis

Chapter F: The transfer system

F5. Housing assistance

Key points

Adequate housing is integral to a decent life. As well as providing basic services, such as shelter, it enables people to participate fully in society. Ensuring access to adequate housing should be a key part of the social safety net by providing assistance based on the means and needs of individual recipients.

Including rent assistance as part of the income support system allows the assistance to be targeted to need and delivered in a way that does not discourage workforce participation. However, the current maximum levels of assistance for private tenants are too low, cutting out below a level that would ensure access to an adequate standard of housing. Indexation of assistance to the Consumer Price Index means that assistance is not well-targeted over time, exposing recipients to the risk of rent fluctuations.

The higher average level of assistance to public tenants is not well-targeted to need. As a majority of public tenants have similar means to recipients of the government's Rent Assistance payment, the large difference in assistance levels is inequitable. The gap in assistance leads to rationing through queuing and can lead to poor outcomes for tenants in the long term.

In public housing, the use of queues to ration assistance and income-based rent setting discourage workforce participation. Current public housing funding neither effectively targets assistance nor encourages use of the housing stock in ways that reflect the needs of clients.

Rent Assistance should be increased so that assistance is sufficient to support access to an adequate level of housing. Assistance should be more appropriately indexed to reflect the growth in line with market rents. Rent Assistance should be extended to public housing tenants, with recipients paying rents that reflect market rates, subject to gradual transitional arrangements.

Social housing providers should receive a new source of funding in respect of tenants with high housing needs, such as those with high costs due to disability or people likely to face discrimination in the private market. The payment would be based on the needs of recipients and could in many cases be directed by them to providers of their choice. In combination with Rent Assistance, this assistance will encourage the formation of a more dynamic social housing market that would reduce reliance on the current system of block grants.

The Australian government and the States should retain the option of providing capital for housing construction.