Aims: Housing assistance (HA) interventions not only aim to meet housing needs they also aim to contribute to improved social and economic outcomes for individuals, families and communities. An inevitable dilemma in the provision of welfare to the disadvantaged is that more generous levels of financial support may also create disincentives for the target group to attempt to increase their income and participation in the labour market. When such an outcome eventuates we say that a poverty trap or unemployment trap exists. Poverty traps refer to situations in which the combined effect of the tax-transfer system results in little, if any, financial gain from a marginal increase to work effort. An unemployment trap exists when the tax-transfer system acts to significantly reduce incentives that can motivate transitions into employment. Raising the rates of economic participation of disadvantaged Australians is an important objective of the Australian Government’s welfare reform agenda. One of the guiding principles of the 2003-08 Commonwealth-State Housing Agreement (CSHA) is ‘to ensure that housing assistance supports access to employment and promotes social and economic participation’ (Commonwealth of Australia Gazette, 2003, p. 4). In order to secure continued Commonwealth funding over the five years, a major performance requirement for the States/Territories is the reduction of work disincentives among public housing tenants through a combination of measures including rent reform to reduce the work disincentives associated with the current link between rent and assessable income.1 Other strategies include improving access to employment opportunities and services, making employment a priority criterion for public housing transfer applications and public housing urban renewal (Commonwealth of Australia Gazette, 2003).