Low-income renters in housing stress despite receiving rent assistance

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on October 29, 2020
Low-income renters in housing stress despite receiving rent assistance

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A third of low-income households receiving Commonwealth Rent Assistance (CRA) are in housing stress even if all their rent assistance is put towards rent.

What's more, one-fifth of low-income private rental households don't receive any rent assistance despite being in housing stress, according to new research from the Australian Housing and Urban Research Institute (AHURI).

The report, ‘Demand-side assistance in Australia’s rental housing market: exploring reform options’, found that rent assistance isn't well-targeted, with 18% of low-income households not receiving any rent assistance despite being in housing stress.

Housing stress in this instance is defined as spending more than 30% of gross (pre-tax) income on rent or mortgage repayments.

AHURI found that raising the CRA maximum rate by 30% could lift 40% of low-income households out of housing stress. 

Meanwhile, changing CRA eligibility criteria to target those in housing stress would reduce the number of low-income households struggling to pay rent by 370,000 - many of whom are currently ineligible for CRA.

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Lender

Variable
More details
UNLIMITED REDRAWSSPECIAL OFFER
  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
UNLIMITED REDRAWSSPECIAL OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
Variable
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AN EASY DIGITAL APPLICATION
  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
AN EASY DIGITAL APPLICATION

Neat Variable Home Loan (Principal and Interest) (LVR < 60%)

  • No ongoing fees - None!
  • Unlimited additional repayments
  • Easy online application, find out if you're approved quick!
  • Redraw- Access your additional payments if you need them
  • Use the app to get loan insights to help you pay off your home loan faster
Variable
More details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
Variable
More details
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.
  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
NSW/VIC/SA METRO & INNER REGIONAL AREAS$5000 CASHBACK. T&Cs APPLY.

Variable Home Loan (Principal and Interest)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of May 24, 2022. View disclaimer.

To be eligible for CRA, you must be receiving social security or veterans' income support and/or more than the base rate of Family Tax Benefit Part A and pay or be liable to pay more than the specified rent thresholds.

Changing the eligibility criteria would mean that 240,000 households in housing stress would become eligible for CRA while 330,000 would lose their entitlement to receive CRA because they're not in housing stress - saving the economy $1.2 billion per year. 

Professor Rachel Ong ViforJ from Curtin University said while changing the CRA eligibility rules offers the biggest benefits in terms of targeting those who need it most, there would be constitutional complications in implementing this reform.

"Currently the Australian Government is constitutionally limited to only paying CRA as a supplement to people who receive certain other social security benefits such as JobSeeker or the Age Pension," Professor ViforJ said. 

"Nevertheless, there could be constitutional ways of overcoming these constraints, such as using the external affairs power to effect the internationally recognised right to housing; expanding the Australian Government’s constitutional powers to make provision for housing benefits; or reforming CRA as a Commonwealth-State and Territory program, with the Australian Government making grants to state and territory governments to pay rent assistance to eligible persons.

"Care would need to be taken to ensure it retains its form as a cash payment to tenants, not landlords."

The research found that a 30% increase in the CRA maximum rate would lift 40% of low-income households out of housing stress.

"This would reflect a much-needed increase in CRA for low-income renters. CRA maximum rates simply have not kept pace with rent increases over time."

But the report warned that in severely disadvantaged areas, up to one-third of an increase in the CRA maximum rate could be captured by landlords lifting their rents. 

"Policies that increase the flow of new housing supply in low-value market segments would be important to counteract this effect," said Professor ViforJ.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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